Economic Developments
Throughout the week, inflation figures for November have been arriving. In the Czech Republic, the headline number for November landed at 7.3% y/y, but it would have been 4% y/y without the effect of the savings tariff from October 2022. In Romania, headline inflation surprised to the downside, coming in at 6.72% y/y in November, while in Slovakia inflation fell to 6.2%. Today, Poland is likely to confirm the flash estimate of November inflation at 6.5% y/y, while Croatia is expected to ease to 4.7% y/y. Looking ahead to 2023, Hungary experienced the highest inflation rate in the region, even exceeding 25% at the beginning of the year. On the other hand, Slovenia and Croatia experienced the mildest development in the region. The inflation rate declined dynamically, especially in the second half of the year. While the downward trend is expected to continue, in several countries (e.g. Hungary, Poland or Slovakia) it is expected to level off in the first half of 2024 and to decline less dynamically next year.
Market developments
As expected, the ECB Governing Council left interest rates unchanged on Thursday. The outlook was also left unchanged, essentially pointing to continued stable interest rates. During the press conference, President Lagarde gave no indication of any foreseeable rate cuts, despite repeated questions. Ultimately, everything will depend on the upcoming data. In particular, the Governing Council wants to see how wages and profit margins develop. Long-term yields did, however, move visibly lower over the course of the week. German 10-year yields are about 15 bps lower at the end of the week, while in the region the long end of the curve is even 30 bps lower (Hungary). Among the CEE currencies, the Hungarian forint and the Polish zloty gained the most against the euro during the week.
