Research Detail
| CEE is not finished with monetary easing, rates will fall further |
CEE is not finished with monetary easing, rates will fall further Currently, weak external demand and more constrained public finances are expected to drive further disinflation in the region. However, in several CEE countries, tax hikes and rising energy prices will likely prevent a more visible decline in inflation next year. Nevertheless, all CEE central banks should continue reducing their still high interest rates towards their neutral levels. If massive tariffs are introduced after the US elections and the FED evaluates their impact on inflation as lasting, the room for further rate cuts in CEE will be somewhat narrower. CEE countries hurried up with their issuance. Hungary, Poland, Slovakia and Serbia will focus on the rollover of their maturing debt, as the net issuance has been completed or nearly completed. Croatia and Hungary plan to focus on issuance of retail bonds in 4Q. The Slovak debt agency announced its plan to launch retail bonds in spring 2025. Slovenia and Serbia are in a comfortable situation, due to their relatively large cash buffers. The Czech MinFin is sticking to its policy of borrowing through short-term papers and awaits a more favorable yield level to intensity the bond issuance. As far as fiscal plans are concerned, Poland does not plan to consolidate in 2025. It appears not bound by new fiscal criteria or bets on the carve-out of high military spending and investments financed by RRF loans (which inflate the deficit, in contrast to grants). Croatia, Czechia, Serbia and Slovenia will focus on keeping their deficits below 3% of GDP. Romania will need to curb its fiscal deficit considerably, tackling the pre-election bonanza, inefficiencies in tax collection and growing public debt. Slovakia has announced a large consolidation package with measures primarily focused on the revenue side. |
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| 2024/10/10 / Erste Group Research |
CEE is not finished with monetary easing, rates will fall further Currently, weak external demand and more constrained public finances are expected to drive further disinflation in the region. However, in several CEE countries, tax hikes and rising energy prices will likely prevent a more visible decline in inflation next year. Nevertheless, all CEE central banks should continue reducing their still high interest rates towards their neutral levels. If massive tariffs are introduced after the US elections and the FED evaluates their impact on inflation as lasting, the room for further rate cuts in CEE will be somewhat narrower. CEE countries hurried up with their issuance. Hungary, Poland, Slovakia and Serbia will focus on the rollover of their maturing debt, as the net issuance has been completed or nearly completed. Croatia and Hungary plan to focus on issuance of retail bonds in 4Q. The Slovak debt agency announced its plan to launch retail bonds in spring 2025. Slovenia and Serbia are in a comfortable situation, due to their relatively large cash buffers. The Czech MinFin is sticking to its policy of borrowing through short-term papers and awaits a more favorable yield level to intensity the bond issuance. As far as fiscal plans are concerned, Poland does not plan to consolidate in 2025. It appears not bound by new fiscal criteria or bets on the carve-out of high military spending and investments financed by RRF loans (which inflate the deficit, in contrast to grants). Croatia, Czechia, Serbia and Slovenia will focus on keeping their deficits below 3% of GDP. Romania will need to curb its fiscal deficit considerably, tackling the pre-election bonanza, inefficiencies in tax collection and growing public debt. Slovakia has announced a large consolidation package with measures primarily focused on the revenue side. |
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