Central Europe: Monetary policy

3 min
Manfred Stamer
Manfred Stamer Senior Economist for Emerging Europe and the Middle East

The National Bank of the Czech Republic (CNB) raised its key monetary policy interest rate by 25bp to 1.75% last week, continuing its gradual tightening cycle (seven hikes by a cumulative 170bp since August 2017). Inflation eased to 2.3% y/y in September but remained slightly above the CNB’s 2% target. In contrast, the National Bank of Romania (NBR) decided yesterday to hold its key monetary policy interest rate unchanged at 2.5%, even though inflation (5.0% y/y in September) remained well above the NBR’s 2.5% ± 1pp target range and nominal wages continued to surge by over +13% y/y in Q3. The NBR argued that core inflation continued to fall to 2.7% in September. Today, the Monetary Policy Council (MPC) of Poland kept its key policy rate at 1.5%, unchanged since March 2015. Inflation fell to 1.7% in October, well below the MPC’s 2.5% target. The three countries’ currencies have shown resilience to global EM turbulences (Argentina, Turkey), having fallen only marginally by less than -1% against the EUR since end-July. We expect gradual monetary tightening in these countries in 2019.