Heterogenous inflation in the CEE region last year

Erste Bank Research Team Erste Bank

On the radar

Industrial output declined by -0.5% y/y in November in Romania.
Retail sales (excluding auto) accelerated to 4.6% y/y in Czechia in November.
Inflation in Slovakia landed at 3.8% y/y in December. In Poland it was confirmed at 2.4% y/y while in Croatia at 3.3% y/y.
Today, Romania releases net wage growth at 8 AM CET.
In the afternoon, Poland will publish core inflation data.

Economic developments

Compared with the elevated price growth seen in 2022–2023, the pace of inflation has slowed materially in 2025, bringing headline rates closer to central banks’ targets. Price pressures moderated particularly in energy and goods categories. However, the decline was uneven: while headline inflation trended downward, core inflation remained stickier, supported by resilient services demand and persistent wage growth. For example, in Poland, headline inflation slowed from almost 5% at the start of 2025 to 2.4% in December. However, across CEE countries price developments were heterogenous. Romania stands out as inflation in 2025 was heavily impact by fiscal measures, namely tax increases. In Slovakia, VAT hikes at the beginning of 2025 also left the mark on price developments. In Czechia, on the other hand, the average inflation in 2025 was slightly above 2%, similar in Slovenia. In all CEE countries the average 2025 inflation was higher compared to Eurozone average. We expect disinflation to continue in 2026, when especially external factors (decline of energy price, goods imported from China) support such scenario.

Market movements

Poland’s central bank governor tried to cool down the expectations for more extensive monetary easing in Poland. He admitted there is still some room for interest rates to go down yet most likely limited as inflation stabilizes within the target. We see the terminal rate at 3.5% at this point. Newly formed Czech government won the confidence vote in parliament. Romania and Croatia are two countries out of eight for which the European Commission endorsed national defense plans under €150b ‘SAFE’ defense loan program.

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Erste Bank Research Team

Erste Bank

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