Elevated inflation still present in CEE

On the radar

• Yesterday, the National Bank of Serbia left its policy rate unchanged at 5.75%

• Net wage growth in Romania arrived at 5.2% y/y for July, with current account data release scheduled also for today.

• At 9:00 CET, Slovakia also publishes wage dynamics.

• Serbian inflation for August will be published at 12:00, while Polish trade balance at 14:00.

Economic developments

Lorem At the end of the summer, inflation remains hot in more than half of the CEE countries. Romania stands out as an outlier, with inflation accelerating to 9.9% y/y in August, up from 7.8% in July. This sharp increase was primarily driven by higher VAT and excise duties, the extent to which these were passed on to consumers, and the removal of the energy price cap in July. Consequently, the year-end inflation forecast has been revised upward to 9.7%, with average inflation in 2026 expected to reach 6.5%. Inflation remains elevated also in Slovakia, Hungary, and Croatia, with rates slightly above 4%. Among these, Croatia is expected to experience a more rapid deceleration, while Slovakia may see a gradual moderation over the course of next year. In contrast, inflation in Czechia came in at 2.5%, slightly below expectations and close to the central bank’s target. Current inflationary pressures in Czechia are largely attributable to domestic demand, particularly household consumption, and food price dynamics. Overall, inflation in CEE is projected to converge closer to the central banks’ targets in 2026.

Market developments

As expected, the ECB Governing Council decided yesterday to leave all three key interest rates unchanged. The key deposit rate thus remained at 2%. The ECB reiterated that future decisions would depend on the outlook for inflation and the risks to it based on ongoing data, the dynamics of underlying inflation, and the strength of monetary policy transmission. The CEE currencies all appreciated slightly following the ECB's decision to hold rates, while euro depreciated against the USD. The 10Y yields showed mixed performance yesterday.

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