Hungary continues monetary easing

This week, the Hungarian central bank is to hold a rate-setting meeting and we expect a 25-basis points cut to 5.5%. Other important releases are scheduled in Croatia and Czechia, where 2Q26 GDP, including the structure of the growth, will be presented. While in Czechia we have already seen a flash estimate, in Croatia, this is the first release of GDP figures and we expect softening domestic demand and strong export growth. In Poland, Croatia and Serbia, retail sales growth will be published for July. Other than that, Poland and Hungary will release the unemployment rates, Serbia wage growth and Slovakia producer price growth. On Friday, after the market closes, Moody’s is scheduled to review Slovenia and Serbia’s ratings and outlooks. &nbsp

FX market developments

Over the last week, we have seen the Czech koruna strengthening against the euro, while the Polish zloty and Hungarian forint have slightly weakened. Locally, the key event is the Hungarian central bank meeting. In Hungary, the market is broadly expecting another 25-basis point cut from the current 5.75% base rate. This expectation is supported by July inflation falling to 1.2%, well below the central bank’s target. Moreover, the central bank had previously indicated that further easing during the summer remains possible. The tone of the accompanying communication could be more important for the Hungarian forint and front-end rates than the decision itself, as the interest rate outlook beyond September will be at the center of attention. Other than that, any messages coming from the policy-makers gathered at the Jackson Hole Economic Policy Symposium may shape the FX market in the region.

Bond market developments

Last week, pressure on fixed income markets continued, with the 10Y German Bund yield reaching a 15-year high. Despite the increase, yields in CEE remained well below the extreme levels seen over the previous decade, although Polish and Czech 10Y yields came close to their highs for this year. The US Treasury’s announcement that it would increase the volume of buybacks of long-term Treasuries failed to provide material relief to global fixed income markets. Markets are now awaiting key messages from policymakers at the Jackson Hole Economic Policy Symposium, which starts on Thursday this week. This week, we expect CEE countries to intensify their efforts to meet all necessary milestones and submit their final requests for payments from the RRF as the end-August deadline approaches.

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