Rate decision in Hungary and GDP data in Croatia

The Hungarian central bank is to hold a rate setting meeting on Friday and we expect stability of rates at 6.5%. There are several other important releases across the region. Croatia will publish 2Q25 GDP data including the structure. As Croatia does not publish flash GDP, it is the first time we will get to see Croatia’s performance in the second quarter. Czechia will release the GDP structure as well. Other than that, retail sales data for July will be published in Poland, Slovenia, Croatia and Serbia. Serbia will also present the real wage growth in June, industrial output growth in July and trade data. Finally, Poland will publish the unemployment rate in July and Slovakia will present producer prices.

FX market developments

CEE currencies have held up quite strongly throughout the week against the euro, but weakened slightly at the end of the week, just ahead of Jerome’s Powell Jackson Hole address.

This week, locally, the Hungarian central bank meeting will be in focus, but no change in rates should be expected. In other countries, Czechia’s central bank minutes (published last week) imply that stability of rates is the most likely scenario for a longer period of time. As September is approaching, the discussion about the monetary policy outlook in Poland should get more attention, as Poland seems to be the only country in CEE to deliver rate cuts still this year. The FRAs 6x9 already moved down by 20 basis points in August. The recent release showing slowing growth of the nominal wage is an additional argument for interest rate cuts, alongside easing inflation.

Bond market developments

Last week, Romania successfully placed bonds with different maturities. Romania’s government presented a second fiscal consolidation and reform package that should be adopted this week through the fast-track procedure. The opposition has the right to file another no-confidence vote. It is likely to be tried, but should not get the majority needed to pass. As for the fiscal stance of other countries, Czechia lowered its projection for the fiscal deficit this year, due to strong revenue from corporate taxes. Looking ahead, opposition party ANO, which currently leads in the polls and is expected to win the parliamentary election in autumn 2025, has become more and more vocal about ending the fiscal austerity run by the current government. Meanwhile, Poland’s Ministry of Finance rejected the need to amend the 2025 budget deficit after the weak performance in the first half of the year. It is also looking into changes in CIT (corporate income tax) and increasing the tax rate for banks (mainly). Finally, regarding Serbia, international investors seem to be showing signs of an increased desire to sell government papers as political instability persists and may threaten the rating and outlook review in early October by S&P. This week, Czechia, Poland and Romania will hold government bond auctions.

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