The Hungarian central bank was the last of the CEE mohicans (apart, possibly, from Serbia): last week's rate cut from 1.5% to 1.35% marked the end of the easing cycle in the region. This, however, does not mean that rates across CEE will be hiked anytime soon, explain Erste Group analysts.

  • In Poland, the economic situation should actually allow for a lower base rate, but the hawkish bias of the NBP prevents further hikes. Analysts expect the policy rate will remain stable at 1.5% for at least another year.
  • In Hungary, the MNB also has strong incentives not to hike - this is not just because of the dampened inflation outlook, but also because of the unconventional policy tools of the central bank. Despite seeing negative real rates from 4Q15 onwards, Erste Group analysts believe that the council is highly unlikely to pull the trigger and hike the key rate in 2015 or 2016.
  • In the Czech Republic, although the FX rate commitment now looks much more like an anchor than a floor, the exchange rate could still remain the most important policy tool. Any change to the policy rate will not occur at least until 2H16.
  • The Romanian central bank has the highest chance of tightening in the foreseeable future, due to the expected strong fiscal loosening and rapidly declining negative output gap. However, Erste analysts do not expect a rate increase before 4Q16.
  • The National Bank of Serbia is expected to maintain its cautious stance despite more favorable macro, fiscal and FX developments. Also, there were no major developments on the restructuring path agreed under the IMF precautionary arrangement, so the NBS could see this as a signal for a more cautious stance. This would, however, still allow for cautious cuts this year.
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