CEE FX: Divergent policy path across central banks – Societe Generale

Societe Generale strategists note that Central and Eastern European (CEE) policy paths are increasingly diverging, with Hungary moving toward easing while Poland and the Czech Republic remain on hold with a hawkish bias. They highlight that Hungarian yields have fallen sharply as Czech and Polish yields have risen, while HUF strength against the euro, in contrast to CZK and PLN weakness, points to Hungary’s macro resilience rather than simple dovishness.

Hungary’s easing seen as resilience signal

"In CEE, recent days have crystallised an increasingly divergent policy path across central banks. Hungary is moving toward easing, while Poland and the Czech Republic remain on hold with a hawkish bias."

"NBP Governor Glapiński yesterday emphasized that interest rates are sufficiently restrictive to stabilise inflation, pointing to a lack of broadening price pressures. He also acknowledged growth headwinds from oil prices."

"In the Czech Republic, inflation slowed to 2.1% in May from 2.5% in April but is unlikely to tempt the CNB to abandon its tightening bias."

"The divergence across CEE is reflected in the bond market: since late February, the 10y HUFGB yield has plummeted by 93bp, while Czech and Polish yields have gained 48bp and 76bp respectively."

"In contrast, FX tacked the other way, with the HUF strengthening 6.5% vs EUR. The CZK and PLN have weakened. This contrast points to a deeper macro differentiation: in the current environment, the capacity to credibly ease is less a sign of dovishness than of macro resilience."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)