Consumer prices grew by 0.6% in February due to the absence of another energy price shock. Still, price pressures remain robust with elevated price growth in services. We have revised our inflation outlook upward and expect now a slower-paced rate-cutting cycle.
The persistence of inflation amidst recession risks will continue to play a crucial role in CE/SEE monetary policy (MP). In the dilemma between combating inflation and not harming the economy too much, central banks (CBs) should maintain their data-driven approaches this year. Nevertheless, 2023 will test the (inflation-fighting) credibility of CBs in Emerging Europe, especially when it comes to possible rate cuts, especially in CE, as early as this year. At least current market pricing seems to be comfortable with current MP stances.