CEE growth story to be updated

Erste Bank Research Team Erste Bank

After seeing the 2Q25 GDP data for the whole region, we will be releasing our Growth Navigator report early this week. In the report, we will flag expected revisions and developments until the end of 2025 and the potential impact of tariffs on 2026 growth forecasts. Otherwise, we will have a rather calm week with only a couple of releases. Producer prices will be published in Czechia, Poland and Slovenia. In Poland, July’s industrial output as well as wage and employment growth will be shown. Croatia and Slovakia have unemployment rate releases scheduled for next week. Croatia will combine this with information on real wage growth in June. Slovakia will publish current account data as well.

FX market developments

The FX market was quite stable throughout the week. The key development was the publication of US inflation for July. As a consequence, we have seen shifting expectations for the monetary policy outlook in the US, which may potentially affect the currencies in the region.

Locally, we have received only a couple of comments from central bankers. Romania’s central bank governor, Mugur Isarescu, stated that the central bank will probably not need to hike rates by the end of the year to address the inflation spike (July’s headline landed at 7.8%, due to a spike in electricity prices after removing the cap). Inflation is expected to peak around 9% and ease sharply in the second half of 2026, according to Isarescu. In Poland, MPC member Kotecki stated that he sees space for some interest rate adjustments this year and even as soon as September.

Bond market developments

In Hungary, the MNB released minutes from its July MPC meeting. The tone was notably hawkish, with the MPC emphasizing the importance of maintaining tight monetary conditions to anchor inflation expectations and guide inflation back to target. Reflecting this stance as well as the lower than expected decline of inflation, we have removed the previously expected 25bp rate cut in September from our forecast. We now see rate stability as an increasingly likely scenario, with a moderate chance of a single 25bp cut in 4Q25. In Czechia, government bonds have so far remained resilient to political rhetoric from Mr. Babis, the current frontrunner in opinion polls ahead of the parliamentary elections. His claims to reverse parts of the pension reform and implement fiscal easing through tax cuts have not yet impacted market pricing. Looking ahead, Romania will reopen ROMGBs maturing in 2028, 2029, 2031, 2033 while Hungary will reopen HGBs maturing in 2032 and 2035. Additionally, Czechia, Hungary and Romania will offer T-bills this week.

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Erste Bank Research Team

Erste Bank

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