Changes in Gasoline prices across CEE

On the radar

• Wage growth in Romania slowed to 3.2% y/y in May. Year-to date current account in Romania was in deficit of EUR -11.4 billion.
• Inflation rate in June eased to 3.5% y/y in Slovakia. In Poland and Croatia, it was confirmed at 2.5% and 4.5% respectively.
• Today, Hungary releases wage growth in May at 8.30 AM CET.
• Slovakia will publish industrial orders at 9 AM CET, while Poland core inflation at 2 PM CET.

Economic developments

Today, we examine gasoline prices across the CEE region. The US launched further airstrikes against Iran on Wednesday. In addition, President Donald Trump pledged to intensify the bombardment until Tehran stops attacking ships in the Strait of Hormuz and agrees to reopen the waterway. The renewed conflict in the Middle East has pushed the price of Brent crude oil towards USD 85 per barrel, which is likely to translate into higher gasoline prices. However, recent changes in gasoline prices across CEE have not been driven solely by oil price volatility. In Poland, the effects of the government intervention introduced to lower gasoline prices are clearly visible. The sharper increase recorded at the beginning of July reflects the termination of support in the form of a reduced tax rate. In Hungary and Romania, exchange-rate movements have a greater impact on gasoline prices in local-currency terms than in Czechia or Poland, where prices in euros and local currencies tend to move broadly in tandem. In Hungary, the recent appreciation of the forint has translated into considerably smaller price increases in local-currency terms than in euro terms.

Market movements

In the US, CPI inflation came in below economists’ forecasts in June. However, Federal Reserve Chairman Kevin Warsh said at a congressional hearing that the slowdown in inflation in June did not mean that the mission had been accomplished. He emphasized the Fed’s independence and the tools available to the central bank to act if necessary. EURHUF is trading close to 360, while EURPLN stands at 4.32, as the escalation of the conflict in the Middle East weighs on CEE currencies. Only the Czech koruna has strengthened slightly since the beginning of the week. Regarding other local developments, Serbia placed a EUR 500 million six-year Eurobond through a private placement, with the proceeds earmarked for military modernization. The Czech Ministry of Finance held three auctions of CZK-denominated medium- and long-term government bonds. In Poland, the central government budget deficit reached PLN 123.7 billion at the end of June, equivalent to 45.5% of the full-year plan. First-half revenue amounted to PLN 278.7 billion, while expenditure totaled PLN 402.4 billion.

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