Recent downward revisions in Central European GDP forecasts emphasize the "muted" part of the "muted recovery" we expected for 2024. Contrary to the US, there were some positives in terms of inflation in CEE. Still, the fight against inflation is far from over, also in Europe. |
Key takeaways
|
After strong disinflation in 2023 some CE/SEE countries recently saw inflation rates returning to the target bound. Does this mean the fight against high inflation is completed? A look at the details of HICP inflation in some CE/SEE countries still warrants a cautious approach from central banks in their monetary easing cycles. |
The first monthly data for 2024 paint a mixed picture: still weak manufacturing, some recovery in consumer demand. SEE is still outperforming CE but the gap should narrow vs 2023. The disinflation process will slow. Rate cuts proceed in CE and should start in SEE in Q2. |
Besides updating 2023 GDP figures based on incoming data, we have revised our outlook for key rates and inflation in Czechia last week. Our overall scenario stands firmly, with recent data coming in in line with our assumptions. |
Currently, FX markets face a variety of influencing factors, with a focus on central banks. Given similar expectations towards Fed and ECB, macro data had a great impact on EUR/USD. The Czech koruna and PLN moved in diverging directions after the Czech central bank sent dovish and the Polish central bank hawkish signals. The EUR/RON exchange rate continues its stable track, while RON bonds remain highly demanded in the first months of 2024. In Russia, the exchange rate should stabilize, supported by more predictable trade data. Furthermore, a deteriorating economic outlook puts pressure on the BYN, while the Ukrainian FX market defies growing risks. This issues features
|