2025 average inflation higher than a year before in CEE

On the radar

• The US Federal Reserve’s interest rate-setting body left key interest rates unchanged on Wednesday.
• Retail sales in Slovenia increased by 2.4% y/y in December, while producer prices landed at 1.1% y/y.
• In Slovakia, producer prices declined by -0.3% y/y in December.
• Today at 8.30 AM CET Hungary published producer prices and trade data.

Economic developments

Today we summarize inflation developments last year. We see heterogeneous disinflation path across CEE, as in most countries average inflation picked up again in 2025 after a significant cooling in 2024. This reflects combination of factors such as base effects, still elevated services inflation, as well as fiscal measures (Romania and Slovakia in particular). Romania stands out as the clear outlier, with inflation rebounding from 5.6% in 2024 to 7.3% in 2025, driven by increases in indirect taxes and administered price changes (removal of cap on energy prices). In Slovakia, higher inflation in 2025 is mostly the outcome of VAT increases from the beginning of the year/ On the other hand, Serbia shows opposite development, with inflation easing in 2025 toward 3.9%. Serbia is the only country when inflation declined in more visible manner last year. Czechia and Poland display a more moderate profile with average inflation in 2025 mostly unchanged compared to 2024 owing to relatively strong disinflation at the end of last year. Finally, compared to the Eurozone, inflation in the region remains elevated. We expect, however, disinflation path to continue throughout 2026 in CEE.

Market movements

The US Federal Reserve's interest rate-setting body left key interest rates unchanged on Wednesday, as widely anticipated. The upper limit of the federal funds target rate remains at 3.75%, with the lower limit at 3.50%. The vote among the relevant FOMC members was clear, with 10 votes in favor of this decision, but not unanimous. At the press conference, Fed Chairman Powell emphasized that the current key interest rate is at the upper end of estimates for the neutral interest rate, at which the economy is neither stimulated nor slowed down. The Fed Chairman therefore believes that, following the recent key interest rate cuts, the FOMC is in a very good position to wait and see and monitor further developments, particularly with regard to inflation and the labor market. As far as local news are concerned, in Czechia, central banker Prochazka admitted there is a room for an interest rate cut if inflation falls further. At this point, development of core inflation warrants stability of rates. Recent comments suggest opening the debate about monetary easing in Czechia that left a mark on the FX market. EURCZK moved up slightly while the Hungarian forint and the Polish zloty remain stronger against the euro this week. Further, Poland’s Ministry of Finance sold bonds for a total of PLN 12.0 billion at its main auction, facing strong demand of PLN 21.4 billion, and added another PLN 2.1 billion at a supplementary sale. Long-term yields have declined across the region this week.

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