Banking Erste Group announced today that, due to inflation, the tightening of monetary policy is “in full swing” throughout the countries of Central and Eastern Europe (CEE), except in Serbia and Croatia.
“It is expected that the National Bank of Serbia will keep the reference rate unchanged at one percent throughout 2022,” Erste Group experts said.
“Monetary policy is reportedly tightening throughout CEE, given that inflation is well above the target level and that its decline is not in sight,” the bank’s experts said.
It is added that the Erste Group expects that all central banks in the region, except the Serbian and Croatian ones, will continue to tighten in the coming months.
As stated from the beginning of the monetary policy tightening cycle in June 2021, the Czech National Bank raised the reference rate by a total of 250 basis points (bp) to 2.75 percent, the Hungarian Central Bank by 150 to 2.1 percent, the National Bank Poland by 115 to 1.25 percent and the National Bank of Romania by 50 bp to 1.75 percent.
It is pointed out that the experts of the Erste Group estimated that the Czech National Bank (CNB) will continue to tighten, and the peak of the cycle should be reached at 3.25-3.5 percent, in the middle of 2022.
It is added that in the second half of 2022, the CNB is expected to start gradually lowering rates, in line with the slowdown in inflation, the strengthening of the crown and the slowdown in economic growth.
In Hungary, another increase of 30 bp to 2.4 per cent is expected at the December meeting. Erste Group experts believe that the reference rate will be 2.85 percent at the end of the first quarter of 2022 and 3.30 percent in the middle of 2022.
The outlook for interest rates in Poland remains, as stated, very uncertain and will largely depend on short-term inflation developments. It is believed that the reference rate will be 2.5-2.75 percent at the end of the first quarter of 2022, and the peak of the cycle of 2.5-3.0 percent should be reached in the middle of 2022.
Erste Group experts expect that the National Bank of Romania will continue to tighten monetary policy, probably at a slower pace of 25 bp. In their opinion, the end point of the cycle should be reached at three percent in the middle of 2022, and the corridor of permanent relief will probably fall to 100 bp again.