Belarus Watch: Prices soar further

Olga ZHEGULO August 12, 2022 08:45 CEST

In July 2022, inflation hit a new high of 18.1% yoy. The driver of price growth remains non-food products, while food was deflationary. Meanwhile, core inflation exceeding CPI signals the remaining administrative price controls on socially essential goods and services.

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Romania Watch: NBR raises key rate by lower-than-expected 75bp, to 5.5%

Nicolae COVRIG August 05, 2022 16:26 CEST

NBR increased the key rate by 75bp, to 5.5%, on Friday, less than expected. NBR is using firm control over money market liquidity conditions as a supplementary instrument to increase the restrictiveness of monetary policy stance. We further see the key rate reaching a peak of 7%.

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CE/SEE Watch: Fiscal consolidation vs anti-inflationary measures

Dorota STRAUCH August 05, 2022 13:13 CEST

From late 2021 governments in CE/SEE have been introducing varied measures to soften the hit from rising prices (energy and food in particular). While this slows fiscal consolidation, it should not lead to its reversal. However, as more measures are introduced, it is crucial that they are mostly targeted and temporary in order not to increase fiscal risks but also not to undermine the adjustments of the demand to the shifts in prices. With that, we share the views recently expressed also by the IMF.

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CEE Banking Watch: Russian risk reduction amidst solid growth in CE/SEE

Gunter DEUBER August 04, 2022 08:44 CEST

Fresh BIS figures show that Russia exposures of Western/European banks are rapidly approaching the "new normal" low single digit exposure range coming from a relative portfolio share of 10%+ (being once on par with Poland or Czechia at ~20%!). Over the next 6-12 months Western bank exposures towards Russia may approach 1998/99 or 2005 levels, the financial interconnectedness with the late Soviet Union is then possibly in further sight, over the next 12 months.

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Poland Watch: CPI remained at 15.5% in July

Dorota STRAUCH July 29, 2022 13:23 CEST

CPI path should become more flat for now but we expect new peaks in early 2023 before a durable decline. Risks to forecasts remain to the upside amid still high and uncertain energy and food prices. After today's release we still expect one more rate hike in September.

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Wide Angle Shot: IMF cautious, lowest growth in 10 years Euro area/USA

Gunter DEUBER July 28, 2022 08:41 CEST

In the course of its July forecast update, IMF has come closer to our cautious view for the euro area. Even without further escalation and uncertainties, the G2 economies (euro area, US) face their weakest growth in a decade in 2023. High inflation and restrictive financing conditions have their price. In CE/SEE, key interest rates are already as high as in the "CE/SEE bonanza period" before the Global Financial Crisis. The IMF has slightly improved its forecast for Russia.

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Wide Angle Shot: Pyrrhic victory on ECB rates, TPI as "hidden" Eurobonds?

Gunter DEUBER July 28, 2022 08:25 CEST

In July, ECB opened a new chapter in its monetary policy. After eight years, negative rates policy has come to an end. For the third time in history a bold 50bp hike was delivered plus further determined hikes were announced. Attention is drawn to a new government bond purchase programme TPI, which is supposed to prevent (strong) increases in yields of (indebted) euro countries. We think markets will challenge the ECB ... maybe also courts.

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