Inflation has risen sharply across the emerging world in the last few months, prompting much more cautious words from central banks (mainly in Latin America and Emerging Europe), but we expect that EM price pressures will ease in the coming months. The recent spike in energy inflation should unwind soon, while supply constraints that are pushing up inflation for some goods won’t last indefinitely. With demand some way below most EMs’ supply potential, underlying inflation rates should fall back. We’re more concerned about inflation dynamics in Central Europe though, and central banks in Czechia and Hungary could shortly join Russia and Brazil in being among the first to hike rates.
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