Fuel pressures testing disinflation across CEE

Erste Bank Research Team Erste Bank

On the radar

Industrial producer prices increased by 5.7% y/y in Croatia.
Croatia’s June retail sales will be released today at 11:00 CET.
Romania’s June unemployment rate will be released today at 08:00 CET.
Hungary’s June trade balance and preliminary Q2 GDP will be released today at 08:30 CET.
Czechia’s preliminary Q2 GDP will also be released today at 09:00 CET.

Economic developments

Given the latest volatility in European energy markets, we dedicate this section to fuel prices across CEE. Looking at the deviation of diesel and Euro95 prices from their respective YTD averages, Czechia, Romania and Poland appear as the most exposed to the energy shock triggered by the Middle East conflict and disruptions around the Strait of Hormuz. Following the memorandum of understanding and the subsequent easing in geopolitical tensions, fuel prices declined sharply, falling to their lowest levels relative to respective YTD averages across the region. This supported a less hawkish market narrative, particularly in Poland and Czechia, where lower energy prices were expected to strengthen the case to avoid monetary tightening. However, renewed geopolitical tensions in July pushed fuel prices higher again, with both diesel and Euro95 moving back above their YTD averages. The renewed energy shock has complicated the disinflation outlook, reinforcing hawkish policy expectations across several CEE economies, particularly in Czechia and Poland. Poland and Romania are already committing targeted measures on fuel prices aimed at cushioning the impact on households and businesses.

Market movements

The Federal Reserve kept its policy rate unchanged at 3.50–3.75%, as widely expected. However, the decision carried a notably hawkish signal, with three policymakers voting for a 25-basis-point increase. The Fed described economic activity as solid and the labour market as stable, while stressing that inflation remains above its 2% target, partly due to energy-related supply shocks amid persistent tensions in the Middle East. Moreover, the unusually large dissent suggests growing concern about price pressures but also showing commitment towards delivering price stability.

Download The Full CEE Macro Daily

Author

Erste Bank Research Team

Erste Bank

At Erste Group we greatly value transparency. Our Investor Relations team strives to provide comprehensive information with frequent updates to ensure that the details on these pages are always current.

AUD/USD edges higher as hot CPI inflation and hawkish RBA lift rate hike bets

The AUD/USD pair gathers strength to near 0.7035 during the Asian trading hours on Friday. The Australian Dollar edges higher against the US Dollar as hotter Australian CPI inflation data has bolstered expectations of Reserve Bank of Australia rate hikes.

USD/JPY meets support near 157.00

USD/JPY retreats for the third consecutive day on Friday, revisiting the 157.00 region before attempting some recovery as investors continue to assess the latest BoJ meeting, where the central bank left rates unchanged, as widely anticipated.

Gold sinks to fresh yearly lows despite risk-off mood as Fed rate hike bets weigh

Gold slips to fresh year-to-date lows on Friday. The metal struggles despite a risk-off mood across markets, as expectations of further Federal Reserve (Fed) interest rate hikes continue to dominate price action, leaving Gold on track to end the month in negative territory.

Ripple Price Forecast: XRP bulls defend $1.20 as sell-side pressure triggers liquidations

Ripple (XRP) trades around $1.25 on Friday, rising from a short-term support level established at $1.20. This minor upward correction follows a sharp sell-off, triggered amid reports of a hack attack on the Binance exchange that impacted approximately $6.3 billion. The attack drove the broader crypto market on edge, as Binance suspended both deposits and withdrawals to contain the situation.

BoJ recap: A pause for now... but Japan has entered a new inflation phase

The Bank of Japan left its short-term policy rate unchanged at 1.25% but delivered a distinctly hawkish message on the risk of an inflation overshoot. The decision passed by 8-1, with board member Takata dissenting in favour of an increase to 1.5%, while Governor Kazuo Ueda stressed that the Bank would continue adjusting policy as needed.

The 2% inflation target came from a throwaway remark. It now moves trillions

The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.