8 Jun 2015
Central Europe: Deflationary pressure set to fade – DB
FXStreet (Barcelona) - The Deutsche Bank Team shares their expectations surrounding inflation in Hungary and Czech Republic.
Key Quotes
“May inflation data start to be released across CEE and should show evidence of reduced disinflationary pressures due to a combination of higher food and fuel prices and, in some cases, recent fx weakness. In Hungary we expect an end to deflation with a zero YoY reading, which would mark a fairly rapid increase from the low of -1.4% YoY in January. The May reading will be the starting point for the updated NBH projections due for release at the end of the month and will therefore be an important determinant of how much further the MPC can cut rates. Given the recent commentary from the NBH and the government, the risks are towards more easing than our 1.5% terminal rate forecast suggests.”
“In Czech Republic, we expect inflation to come in above the CNB forecast for the fourth consecutive month and for the CNB’s assumption of a drop into deflationary territory in Q3 to look increasingly unlikely. But with inflation remaining well below target at around 0.5% YoY, the Bank’s very dovish stance will likely remain unchanged for now.”
Key Quotes
“May inflation data start to be released across CEE and should show evidence of reduced disinflationary pressures due to a combination of higher food and fuel prices and, in some cases, recent fx weakness. In Hungary we expect an end to deflation with a zero YoY reading, which would mark a fairly rapid increase from the low of -1.4% YoY in January. The May reading will be the starting point for the updated NBH projections due for release at the end of the month and will therefore be an important determinant of how much further the MPC can cut rates. Given the recent commentary from the NBH and the government, the risks are towards more easing than our 1.5% terminal rate forecast suggests.”
“In Czech Republic, we expect inflation to come in above the CNB forecast for the fourth consecutive month and for the CNB’s assumption of a drop into deflationary territory in Q3 to look increasingly unlikely. But with inflation remaining well below target at around 0.5% YoY, the Bank’s very dovish stance will likely remain unchanged for now.”