New Europe Weekly

Credibility − If you don't have it, build it

Fri, Jun 20 2008, 13:13 GMT
by Danske Research Team

Danske Bank A/S


Central bankers around the world are having sleepless nights over the deathly cocktail of slowing growth, a credit crunch and sharply rising inflation. The central bankers in CEE/EMEA are not having an easier time than their colleagues around the world. In fact, because most EMEA countries are struggling with large exter-nal imbalances, one could argue that EMEA central bankers have more to worry about.

Until now the central bankers in the region have han-dled the challenges in very different ways. The Turkish central bank first cut rates, then hiked and then embar-rassingly was forced to change its inflation target. The South Africa Reserve Bank (SARB) has not only wildly missed its inflation target, but also failed in its commu-nications policies. In Ukraine the central bank has been overruled on exchange rate policy by its own highly poli-ticised central bank council. So there is hardly much to cheer about in term of monetary policy credibility in Turkey, South Africa and Ukraine.

The Polish and Hungarian central banks, on the other hand, have shown great resolve and further confirmed their inflation-fighting credentials by resolutely tighten-ing monetary policy as a response to rising inflationary pressures. In the coming week we expect both the Pol-ish and Hungarian central banks to hike interest rates once again.

Published on  Fri, Jun 20 2008, 15:12 GMT

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