As global central banks shifted towards "high-for-longer", most of CEE is set for (further) key rate cuts. Still, despite the expected easing, the lagged effects of the fast and sizeable hiking cycles will still be felt. Meanwhile upside risks to inflation, the stance of ECB and the Fed will all warrant a cautious approach to rate cuts.
The central banks are back in session and for the most part, delivered results that were also priced in by the markets. Unlike the Fed and ECB, central banks in CE/SEE are already actively discussing interest rate cuts, some of which have already been implemented. Nevertheless, the interest rate differential is currently still favorable for the latter. In Russia, the situation is different; most recently, the CBR increased the interest rate by 200 bp to 15%, but this has only a limited impact on the exchange rate. Poland and Hungary also combine a positive outlook for the disbursement of NGEU funds, improving their overall outlook. In Southeastern Europe, the RON continues to show resilience and the expected capital inflows should keep it that way.
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