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As expected, Hungarian policymakers kept interest rates unchanged at 6.00% for the third consecutive meeting today. As in the Czech Republic, we now expect rates to remain on hold into 2012. However, Poland is the odd-one-out in Central Europe. March’s …
18th April 2011
The appointment of Erdem Basci as the new Governor of the Central Bank of Turkey will no doubt lead to concerns about increased government influence over monetary policy. While these concerns are perhaps understandable, we think that they are probably …
14th April 2011
Today’s inflation data from Bulgaria were not as bad as the market had feared. Even so, prices are still rising at their fastest pace for two years and, in the context of the currency board arrangement with the euro, will mark a further decline in the …
12th April 2011
We doubt that the bailout of Portugal will draw a line under the problems in the euro-zone’s peripheral economies and fear instead that it may mark the start of a new, more dangerous phase of the crisis. Accordingly, while financial markets in Emerging …
The near-term outlook for the Polish economy remains amongst the strongest in the region, with GDP growth set to remain close to its potential rate of around 4% for the next couple of years. But the real challenge for the government in the near term is to …
11th April 2011
Romania’s recovery will be two-speed, with industrial output boosted by foreign demand (especially from Germany) while domestic demand will remain sluggish. We expect the central bank to keep rates on hold this year and instead expect it to curb imported …
8th April 2011
The accompanying statement to today’s Polish MPC meeting was more hawkish than we had expected but that doesn’t necessarily mean that interest rates have much further to rise. If, as we expect, core euro-zone economies start to lose steam over the coming …
5th April 2011
March’s PMI data from across Emerging Europe were a mixed bag, but the bigger picture is that the region’s manufacturing recovery remains in good shape. Industry will remain the principal engine of growth in the near term. … Industry remains in good …
1st April 2011
Another month, another set of data showing bumper industrial production growth. Turkish industry is leading the way and is now growing by close to 20% y/y. But most other countries in the region are experiencing double-digit industrial production growth …
31st March 2011
In some respects, Turkish fourth quarter GDP data simply confirm what we already knew – the economy picked up pace towards the end of last year and ended 2010 on a high note. But the sheer pace of growth in Q4, and its increasingly unbalanced nature, adds …
The likelihood that the ECB will raise interest rates next month increases the chances that central banks in Emerging Europe will tighten monetary policy too. But the bigger point remains unchanged – monetary policy in most of the region will remain …
29th March 2011
The recent spat over an apparent ‘black hole’ in the Polish/German trade balance ignores the fact that inconsistencies between bilateral trade balances are fairly common. But the large ‘net errors and omissions’ component of Poland’s balance of payments …
28th March 2011
Today’s decision by the Central Bank of Russia (CBR) to keep its key interest rates unchanged suggests that inflation concerns have slipped down the government’s list of priorities over the past few weeks. But the decision to hike reserve requirements …
25th March 2011
The recovery in Emerging Europe remains broadly on track. GDP growth rates are likely to prove solid, if not spectacular, in a number of countries over the coming years with Turkey, Poland and, in the near term at least, Russia leading the way. …
24th March 2011
Today’s decision by the Central Bank of Turkey to raise bank reserve requirements by a massive 400bp should help to calm market fears that it has fallen behind the curve in the face of booming domestic demand. We expect further increases in reserve …
23rd March 2011
Slower-than-expected inflation in Poland last month means that an increase in interest rates at the Monetary Council’s April meeting is not quite the done deal that the markets seem to expect. What’s more, the relative weakness of underlying price …
15th March 2011
The likelihood that the ECB will raise interest rates next month increases the chances that central banks in Emerging Europe will tighten monetary policy too. But even so, we do not expect to see a stampede to raise interest rates. Indeed, of all the …
14th March 2011
If the recent spike in oil prices is sustained, it could add as much as 1.5% to real GDP growth in Russia this year. But while higher commodity prices may boost growth in the near term, they work against the structural reforms that are needed to raise …
9th March 2011
The National Bank of Poland left interest rates unchanged at 3.75% this lunchtime, as we expected. It was probably a close call and the market is still pricing in further significant hikes in the benchmark rate over the coming quarters. But Q4 GDP data …
2nd March 2011
The long-awaited ‘structural revamp’ of the public finances that was unveiled by Hungary’s government earlier today was big on rhetoric but short on detail. The bottom line is that the government’s plans to reduce debt and the deficit still appear overly …
1st March 2011
February’s PMI data from across Emerging Europe show that the region’s industrial recovery is still going strong. Indeed, our regional PMI index is now at its highest level on record. Industry will remain the main driver of growth in the near term. … …
Q4 GDP data from across Emerging Europe show that the region’s recovery continued in the final months of last year. Of the economies that have reported data so far, all posted positive quarterly growth in Q4 and growth accelerated on an annual basis in …
28th February 2011
Today’s decision by the Central Bank of Russia (CBR) to increase both bank reserve requirements and its key interest rates by 25bps is a further sign that rising inflation is moving up the government’s list of policy priorities. Further hikes seem all but …
25th February 2011
Growing concerns over unrest in the Middle East have sparked a sell-off in equity markets across the world over the past week, and Turkish stocks have been hit harder than most. Yet trade and investment flows with the Middle East are not as large as many …
24th February 2011
Today’s data from Poland were a bit of a disappointment and leave next week’s interest rate decision finely balanced. Meanwhile, recent comments from MPC members have been as contradictory as ever. It’s a close call, but the chances of another hike next …
23rd February 2011
The National Bank of Hungary kept rates unchanged at 6% earlier today, as expected, bringing to an end a short-lived tightening cycle that had spanned three months. Inflation is likely to slow over the course of this year and could fall back to target by …
21st February 2011
January’s activity data from Russia suggest that the economy made a dire start to 2011. Of course, it is unwise to read too much into one month’s data. What’s more, with oil prices currently over $100pb, growth should begin to pick up in the coming …
18th February 2011
The Central Bank of Turkey kept interest rates on hold at 6.25% earlier this month and is now in ‘wait and see’ mode to evaluate the impact of its unconventional experiment with monetary policy (cutting interest rates while raising banks’ reserve …
17th February 2011
Today’s decision to keep interest rates unchanged at 6.25% suggests that the Central Bank of Turkey (CBRT) has reached the end of its rate-cutting cycle. While policymakers’ unconventional policy response (cutting interest rates while raising banks’ …
15th February 2011
The key message from the raft of Q4 GDP data released today is that the region’s recovery is continuing but that the underlying pace of growth is now starting to slow in a number of countries. … Recovery continues but low hanging fruit has been …
Today’s strong GDP data from Estonia mean that the economy grew by 3.1% in 2010 as a whole – slightly outpacing even our above-consensus forecast of 3%. But while growth should remain pretty impressive in the near term, there are signs that the …
11th February 2011
Turkey reported another large shortfall on its current account in December, which pushed the deficit for last year as a whole to 6.4% of GDP. Rising oil prices partly explain the increase in the external deficit but are by no means the whole story. …
The pace at which Russian monetary policy is shifting from a regime centred on targeting the exchange rate to a regime based on targeting inflation remains unclear, but our calculations of FX purchases by the Central Bank (CBR) suggest that the transition …
9th February 2011
The Hungarian government is due to begin debating a “structural revamp” of the public finances in the coming weeks, which will entail substantial budget cuts. A first reading of the Growth and Stability Programme will be held on the 16th February, and the …
7th February 2011
The hawkish comments that accompanied today’s decision to leave Czech interest rates unchanged have pushed the koruna above 24/euro for the first time since October 2008. But while the chances of an interest rate rise at some point over the first half of …
3rd February 2011
With manufacturing PMI surveys across most of Emerging Europe on the up, and now at record highs in Turkey and the Czech Republic, the near-term outlook for industry remains strong. Meanwhile, the latest data suggest that firms are absorbing at least part …
1st February 2011
Inflation is rapidly moving up the list of concerns for policymakers in Emerging Europe. It is now running above target in most of the region’s major economies, including Poland, Hungary, Romania and the Czech Republic and is above the government’s …
31st January 2011
Today’s decision by the Central Bank of Russia (CBR) to raise bank reserve requirements is further evidence that inflation worries are starting to trump growth concerns. … Russia steps up fight against …
Today’s estimate that the Polish economy expanded by 3.8% in 2010 was in line with our forecast and reinforces the view that the country is leading the recovery in Emerging Europe. GDP should grow by a solid 4% or so this year but twin fiscal and current …
28th January 2011
Today’s raft of December activity data from Russia is, on balance, pretty disappointing and suggests that the economy is only recovering slowly from last summer’s drought. Growth should accelerate in the first half of 2011, but we remain comfortable …
The Central Bank of Turkey’s policy of cutting interest rates to deter speculative capital inflows despite the economy’s comparatively good growth prospects is not necessarily the recipe for disaster that many assume it to be. The crucial point, however, …
24th January 2011
The National Bank of Hungary (NBH) this afternoon voted to hike interest rates by 25bps for the third consecutive month (to 6.00%). The outlook remains highly uncertain, but on balance today’s move should be the last hike in the recent cycle. Indeed, if …
The past month has produced conflicting signals about the future path of monetary policy in the region. While policymakers in Hungary and Poland have begun the year by hiking interest rates, their counterparts in Turkey, where the growth outlook is …
21st January 2011
Despite today’s decision by the Central Bank of Turkey (CBRT) to cut interest rates, increases in bank reserve requirements that are likely to be announced over the next couple of days mean that monetary policy will actually tighten. The key point is that …
20th January 2011
With underlying inflation pressures still relatively subdued over the key 12-18 month policy horizon, today’s hike in Polish interest rates is unlikely to be the start of a particularly aggressive tightening cycle. We remain comfortable with our below …
19th January 2011
The good news is that the region’s banking sector is starting to find its feet. The bad news is that familiar vulnerabilities remain in those countries that were hit hardest during the global crisis, which leave the financial system vulnerable to an …
18th January 2011
After remaining on hold for the past 18 months, it seems all but certain that Polish interest rates will be hiked later this month. But we doubt that this will mark the start of an aggressive tightening cycle. … How far will interest rates rise in …
14th January 2011
With Portugal seemingly on the cusp of an IMF/EU bailout, we suspect that the euro-zone debt crisis is about to enter a new, more dangerous, phase that ultimately ends in some form of break-up of the single currency area. The immediate impact of such an …
12th January 2011
With oil prices nearing $100pb, the near-term prospects for the Russian economy are looking up and the immediate challenge for 2011 will be to prevent inflation accelerating. Nonetheless, higher commodity prices will slow the economic needed to boost …
10th January 2011
We do not believe that the outlook for Hungarian inflation is as troubling as the National Bank now seems to think. Inflation is still above target and has been rising recent months, but the pick-up has been due to a spike in global food and energy …
7th January 2011
