Accelerating money supply growth

Erste Bank Research Team Erste Bank

On the radar

Unemployment rate in Romania dropped to 5.6% in February.
Today, at 11 AM CET, flash inflation will be released in Croatia as well as other HICP flash estimate for Eurozone countries.
Tomorrow, Poland and Romania central banks have rate setting meetings.

Economic developments

M3 money supply growth in the region (as well as in Eurozone) has accelerated in the recent months. Within the region, the money supply growth was negative only in Hungary in the second half of 2023. In Czechia, Poland and Romania it had been slowing down but sustained positive growth dynamics as opposed to Hungary. The money supply growth bottomed out in the third quarter of 2023 and since then it has been accelerating. We see the change of the trend as a positive sign that supports our story of economic recovery. Further, easing credit conditions should improve the situations of households.

Market developments

According to the minutes from the March 20 meeting of Czech central bank, most of the policymakers preferred to lower interest rates in cautious steps due to lingering inflation risks. In particular, many central bankers emphasized the upside risks to inflation at the forecast horizon and the effort not to surprise the financial market. Further, rising expectations for the neutral policy rate to be higher than in the past could have played a role as well. It may be also a factor in the future interest rate decisions limiting the size of monetary easing in Czechia. There were no major changes on the FX market compared to Tuesday. On the bond market the long-term yields have moved up.

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Erste Bank Research Team

Erste Bank

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