Central European policymakers are seeking to end a cycle of interest rate hikes running since last year even as inflationary pressures remain and the world's major central banks keep pursuing higher rates.
While the region was well ahead of others last year in policy tightening, it now wants to be the first to call time on hikes. Whether it can do so will depend much on wage pressures subsiding and how much a weakening market mood will hurt its currencies.
That could add pressures to inflation that is still to peak and prolong the region's fight with the biggest price surge in decades well into next year. The National Bank of Hungary last month brought the main rate to 11.75%, up more than 1,100 basis points since June 2021. "Tightening is justified. The only question is the level," Kotian said, adding smaller hikes are possible.Poland, too, has had double-digit wage growth since February, and inflation is running at over 16%. Poland's government is also spending big to freeze power prices for people hit by soaring bills.While central bank Governor Adam Glapinski has guided for rates to possibly peak at 7.
In August, the inflation rate slowed to 17.2% - the first sign of a price peak in central Europe. Czech wage pressures are also more subdued than in Poland or Hungary, giving the country's central bank the best shot at holding the line on rates.