Inflation expectations eased in May

Erste Bank Research Team Erste Bank

On the radar

In Czechia, industrial output (NSA) increased by 1.5% y/y, while construction output went up by 7.7% y/y.
Trade surplus reached CZK 6.8 billion in Czechia in April, while share of unemployed declined to 4.8%.
In Serbia, producer prices grew 7.7% y/y.
Today, trade data will be released in Romania at 8 AM CET, while in Slovakia at 9 MA CET.
Inflation rate is due in Hungary at 8.30 AM CET.
Croatia will publish trade data and tourism arrivals at 11 AM CET.

Economic developments

Today, we offer a glimpse at the price expectations of households over the next 12 months that shows that inflation expectations spiked in April in response to high commodity prices. Inflation expectations spiked in April and, luckily, eased in May. Consumers across the region and all of Europe experienced hefty price increases at fuel stations in the first place and saw headline inflation rising in recent months. The Brent oil price above USD 100 per barrel left a mark on how consumers will perceive inflation developments in the future. With news on a ceasefire and the Brent oil price easing toward USD 90 per barrel, we see inflation expectations anchoring instead of rising further. In May, we have already seen flash estimates of headline inflation in several CEE countries. In Poland, Croatia and Czechia, inflation was lower than expected that supports wait-and-see stance of the central banks for the time being. In Slovenia on the other hand inflation increased further in May. Today, Hungary will show May’s inflation, while Romania shortly later.

Market movements

Both FX and bond markets have been relatively stable on Monday. Hungary’s year-to-date cash-flow budget deficit reached 90% of full-year target in May. Hungary will need to address fiscal challenges in short period of time and markets are waiting budget amendment for 2026 and plans beyond this year. Romania sold RON 847.5 million of government papers maturing in 2029 amid solid demand (bid-to-cover ratio was 1.63). Bonds were priced to yield 6.57%. There are no other news regarding markets as focus is on ECB meeting on upcoming Thursday. The market expects the ECB Governing Council to raise its key interest rates by 25 basis points at next week’s meeting. The deposit rate, which is decisive for the direction of monetary policy, will then stand at 2.25%.

Download The Full CEE Macro Daily

Author

Erste Bank Research Team

Erste Bank

At Erste Group we greatly value transparency. Our Investor Relations team strives to provide comprehensive information with frequent updates to ensure that the details on these pages are always current.

EUR/USD struggles to build on recent rebound, holds above 1.1550

EUR/USD trades marginally lower on the day but holds above 1.1550 in the American session, following Thursday's rebound. The pair holds near its intraday high as the US Dollar remains pressured by hopes the Middle East conflict will soon come to an end.

GBP/USD hovers around 1.3400 as investors await war clarity

GBP/USD remains near its daily open, not far from 1.3400, in the second half of Friday's session. The US Dollar lost its previous intraday strength and weakens as investors await clarity on the US-Iran war.

Gold stabilizes above $4,200 as wait-and-see continues

After rising more than 3% on Thursday, Gold (XAU/USD) stabilized around the $4,200 mark in the American session on Friday. The US dollar seesaws between gains and losses, but remains within familiar levels as investors remain skeptical yet hopeful about a resolution to the Middle East conflict.

Week ahead: Central bank barrage ahead: Fed, BoJ, RBA, SNB and BoE in focus

The US dollar outperformed most of its major counterparts this week, with investors remaining convinced that the Fed may need to press the rate hike button before the end of this year. Fed hike bets were significantly bolstered after the US jobs report for May came in much stronger than expected, with nonfarm payrolls rising to 172k and confounding expectations of a much more modest 85k gain.

SpaceX launches 24% higher at Friday debut

Space Exploration Technologies (SPCX), aka SpaceX, zoomed 24% higher soon after the start of its first IPO trading day on Friday. Shares of the rocket and artificial intelligence (AI) company founded by Elon Musk began trading at about 11:46 am EST and quickly gained speed.

4.2% headline, 0.2% core: Why the Fed's next hike may be targeting the wrong problem

May's CPI put headline inflation at 4.2% on the year, up from 3.8% in April and the hottest reading since April 2023, while core prices rose just 0.2% on the month, undershooting the 0.3% consensus and halving April's pace.