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.

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Erste Bank Research Team

Erste Bank

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