Most countries in the region are on the road to recovery, but the large amount of spare capacity created by last year’s recession means that on the whole the outlook for inflation remains extremely benign. While inflation did edge up in Hungary and Poland last month, this was driven in both cases by a rise food prices. By contrast, core inflation remains much weaker. Instead, to the extent that there are concerns about inflation anywhere in the region they are in Turkey, where a strong bounce recovery means that the economy is now operating at close to potential, and Romania, where renewed concerns about the recovery have led to further currency weakness in recent weeks.
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