Central banks are meeting in the next three weeks in eastern European Union countries that have diverged in their approach to interest rates.
The Czech Republic became Europe’s first nation to raise rates in 2017 and Romania followed soon after. Both may continue to push borrowing costs higher this year or in early 2019. In contrast, Poland and Hungary look destined for a different tack in the medium term, hunkering down in wait-and-see mode as moribund inflation allows rates to stay at record lows for longer, according to Bloomberg.
“We’ve got two camps: Poland and Hungary being really dovish and suggesting rates may remain unchanged by 2020,” Guillaume Tresca, a senior emerging-markets strategist at Credit Agricole, said by phone. “More rate hikes are expected in the Czech Republic and Romania this year.”
These are some of the considerations for the region’s central bankers.
The Czechs will probably stand pat when they meet on March 29, keeping the main rate at 0.75 percent. That would follow three hikes and a world-beating currency rally that delivered monetary tightening equivalent of as much as to 2.25 percentage points in interest rates, deputy central bank Governor Vladimir Tomsik said last week. The bank can afford “a bit of a timeout” until near end-year or early 2019 so it can wait for the euro zone’s monetary policy to start moving in the same direction, he said, according to Bloomberg.
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