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Less aggressive monetary easing to come

Less aggressive monetary easing to come

Calming down overly aggressive expectations on monetary easing led to some correction on CEE bond markets in 1Q24. With inflation at the target in some countries or getting closer, we expect some cautious steps towards normalization of interest rates, bearing in mind the still high price dynamics of services and rebound of real wage growth.

- inflation surprised on downside in 1Q but risks of reversal or slowdown are mounting

- monetary easing is going to be less aggressive in months to come compared to previous moves and expectations

- countries with rather loose fiscal stances (Hungary, Poland, Romania and Slovakia) advanced strongly in their borrowing plans in 1Q24

- after some market correction from the beginning of year we expect the long end of LCY yields to drop with lower key rates
- Croatia has a solid chance for another wave of rating upgrades in 2H24, Slovenia’s rating outlook from Moody’s/Fitch could be changed to positive

PDF Download Download PDF (2.4MB)
2024/04/11 / Erste Group Research

Less aggressive monetary easing to come

Calming down overly aggressive expectations on monetary easing led to some correction on CEE bond markets in 1Q24. With inflation at the target in some countries or getting closer, we expect some cautious steps towards normalization of interest rates, bearing in mind the still high price dynamics of services and rebound of real wage growth.

- inflation surprised on downside in 1Q but risks of reversal or slowdown are mounting

- monetary easing is going to be less aggressive in months to come compared to previous moves and expectations

- countries with rather loose fiscal stances (Hungary, Poland, Romania and Slovakia) advanced strongly in their borrowing plans in 1Q24

- after some market correction from the beginning of year we expect the long end of LCY yields to drop with lower key rates
- Croatia has a solid chance for another wave of rating upgrades in 2H24, Slovenia’s rating outlook from Moody’s/Fitch could be changed to positive

PDF Download Download PDF (2.4MB)



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