CEE Weekly Bond Markets Outlook

Inside the CEE Weekly Bond Market issue:

The Monetary Policy Council (MPC) of Poland cut the main interest rates by 25bp. The 14-day intervention rate has been lowered to a new low of 4.75%. Due to political risks ahead of the September elections and as the Polish economy might be on the right track, we expect the MPC to take an interest rate cut break in the upcoming months.


According to the National Bank of Hungary the tax-adjusted equivalent of the inflation target is around 2.3%. In our view, CPI levels below 2% are also likely next year. While a 25 bp rate cut could follow the Polish move on 22 August, the NBH’s lower effective inflation target paves the way for aggressive rate cuts early next year that may total 100 bp to 5.5%.


As expected the Czech National Bank (CNB) left key 2-week repo rate unchanged and revised upwards its quarterly inflation outlook by roughly 0.5% at its monthly board meeting on monetary policy. Despite the CNB’s moderate rhetoric we still count on a moderate interest rate hike to 2% by the end of the year.


The Slovak crown followed the Polish zloty lower in previous weeks, but failed to keep track once the PLN reversed its trend towards appreciation. We expect the SKK to be tied to regional developments at least until the Polish parliamentary elections in September. In a longer term perspective, however, we still remain bullish on the SKK based on the expectation of very solid economic fundamentals.