CEE: Central banks in Serbia and Romania and GDP data

CEE releases will be dominated by the preliminary estimates of 3Q26 GDP for Poland, Romania and Slovakia, alongside central bank meetings in Romania and Serbia. Poland is expected to remain among the fastest-growing CEE economies, with GDP growth at 3.8% y/y in 3Q26. Slovakia continues to struggle, with growth remaining subdued amid weak industrial activity and external demand. Romania is expected to report a slight contraction in economic activity on a y/y basis, reflecting the ongoing impact of fiscal consolidation on domestic demand. On the monetary policy front, both the National Bank of Romania and the National Bank of Serbia are expected to leave their key interest rates unchanged at 6.5% and 5.75%, respectively. Inflation releases will attract attention, with October figures scheduled for Hungary, Romania, Serbia and Slovakia. So far, releases in Czechia and Poland have surprised to the downside. Beyond inflation, industrial production figures from Slovakia and Slovenia on Tuesday, followed by Romania on Friday, will provide further insight into the performance of the manufacturing sector. September wage data from Romania and Slovakia will also be published. Finally, trade balance releases from Romania and Slovakia at the beginning of the week, followed by Poland on Friday, will shed light on external demand and trade dynamics across the region. 

FX market developments

CEE currencies strengthened against the euro in reaction to the US mid-term election outcome. The Democrats won both chambers, taking at least 54 Senate seats and ending unified Republican control. A wave of anger over Trump’s policies, particularly the role of the US-Iran war in pushing up the cost of living, helped the Democrats win the elections. Apart from a boost to the FX market, oil prices fell on expectations that the Democratic victory and control of both chambers could reduce the risk of a further escalation of the US-Israeli war against Iran. Brent crude dived below USD 100 per barrel last week. At this point, however, it is too early to say whether it will be a long-lasting trend. The central banks in the region thus remain cautious. Poland kept the policy rate unchanged at 3.75% but revised the inflation forecast up for 2027. The government will try to prevent energy price increases in the election year, taming the pressure on headline inflation. Thus, in our baseline, we do not expect any rate hike. Czechia decided to hike its key policy rate to 4% in response to growing demand pressure. So far, Czechia's has been the only central bank in the region that has responded with rate hikes. This week, we expect Serbia and Romania’s central banks to remain on hold. In Romania, the still-elevated inflation continues to limit the scope for monetary easing, while Serbia's central bank is likely to maintain a cautious stance amid persistent inflationary pressures and global uncertainty.

Bond market developments

The result of the US mid-terms resulted in lower bond yields, triggered by lower oil prices and more uncertainty surrounding tech stocks and their investments in AI. Czech bonds benefited from the CNB’s comments on the future interest rate path, as the central bank downplayed bets on any aggressive tightening. Market expectations for additional hikes have collapsed to +50bp, from +75bp. Last week, Romania’s government tapped international markets and raised EUR 4.5bn across three tranches, comprising EUR 1.25bn in four-year bonds, EUR 2bn in eight-year bonds and EUR 1.25bn in 12-year green bonds, with investor demand exceeding the offered amounts across all three tranches. After this tap, Romania has covered 80% of its gross financing needs for this year. Nevertheless, ROMGBs underperformed the regional peers, as the opposition initiated a motion against the finance minister, who has been the main safeguard of fiscal discipline in the new minority government.

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