CEE: S&P to review Slovakia’s rating
The upcoming meeting of the Hungarian central bank will be a key event. We do not anticipate any changes to the key policy rate at this meeting. Recently, we revised our interest rate forecast for Hungary and now expect rate stability for most of 2026. Poland is also set to release a noteworthy set of data, including industrial output and retail sales growth for September. Several CEE countries will publish labor market data, such as the unemployment rate (Slovakia, Croatia, Hungary, and Poland) and wage growth (Poland, Croatia, and Serbia). In addition, producer price data will be released in Poland and Slovenia. S&P is scheduled to review Slovakia’s credit rating and outlook; a downgrade cannot be ruled out given the current negative outlook.
FX market developments
The Hungarian forint and the Polish zloty have appreciated against the euro over the past week. The EUR/HUF exchange rate has recently hovered around 390, ahead of the central bank meeting this week. We expect the policy rate to remain stable at 6.5%, with the central bank likely to maintain a relatively hawkish stance, downplaying expectations of monetary easing. In Poland, following the interest rate cut in October, central bankers are discussing the likelihood of further monetary easing before year-end. Kotecki stated that the October rate cut should be the last in 2025, with any additional reductions considered only in 2026. Dabrowski sees room for further monetary easing if the inflation trend does not change. Although a rate cut is not necessarily expected at the November meeting, he anticipates a terminal rate between 3.5% and 4% by the end of 2026. Additionally, data on business activity in the Eurozone’s manufacturing and services sectors for October will be published, which may influence FX market developments in the region.
Bond market developments
Long-term yields have declined across the region, with the exception of Hungary, where the bond market remained stable last week in anticipation of the central bank meeting, where rate stability is broadly expected. In Czechia, government coalition talks are ongoing, with a program being drafted by ANO and the two coalition parties, SPD and Motorists. In response to U.S. sanctions on Serbia’s oil company NIS, which disrupted Serbia’s energy supply chains, Croatia has halted supplies, while Hungary’s MOL has increased oil exports to Serbia. We have published the Bond Report titled “Fiscal Slippage and Less Space for Monetary Easing”, which discusses the relaxation of deficit targets in several countries and the trajectory of public debt across the region. This week, Slovakia plans to issue several government bonds. Additionally, Czechia, Poland, and Romania are scheduled to hold auctions. Finally, Slovakia will be reviewed by S&P, and a one-notch downgrade in its credit rating cannot be ruled out, given the negative outlook.
Author
Erste Bank Research Team
Erste Bank
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