CEE Macro Weekly: Bright outlook for growth and inflation

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TOP MACRO THEME(S):

• Poland’s solid spring rebound (p. 3) – Poland’s economy showed strong signs of recovery in early 2q25, with surprising strength in wages, retail sales, and industrial output. These indicators point to a rebound in household consumption and investment. This broad-based improvement supports expectations of strong GDP growth, driven by robust domestic demand, improving credit conditions, and ongoing industrial modernization.

WHAT ELSE CAUGHT OUR EYE:

• POL: According to the flash estimate, CPI inflation eased to 4.1% y/y in May from 4.3% in April — a stronger-than-expected disinflation signal. Food prices rose by 5.5% y/y, while energy inflation remained elevated at 13.1% y/y. Fuel prices continued to decline. We estimate that core inflation held steady at 3.4% y/y, though underlying momentum continues to weaken, signaling ongoing price normalization. We expect headline CPI to return to the NBP’s tolerance band (1.5-3.5% y/y) in July, with core inflation gradually trending lower. In this context, the case for two rate cuts this year — likely in July and November — is gaining strength.
• POL: The Energy Regulatory Office approved a new household gas tariff of 204.26 PLN/MWh, down from the previous rate of 239.65 PLN/MWh. Due to distribution and fixed charges, the actual decrease in consumer bills will range from 8.06% to 10.99%, depending on the specific tariff category. The new rate will be in effect from July 2025 through June 2026. We estimate that this change will lower headline CPI inflation by 0.2pp y/y. As a result, CPI inflation in July is likely to not only fall back within NBP’s tolerance band (1.5–3.5%) but may also edge closer to 3.0% y/y.
• HUN: The MNB left its key policy rate unchanged at 6.50%, in line with prior guidance, and made no changes to its forward guidance. The Council reiterated the need to maintain positive real interest rates to anchor inflation expectations and support financial market stability. The decision was justified by lingering inflation risks — particularly in market services — and external uncertainty, including rising trade tensions and tariff-related volatility. Although inflation eased to 4.2% y/y in April, price dynamics remain elevated and are expected to stay at similar levels through year-end. The central bank also underscored the limited effectiveness of government anti-inflation measures and the continued vulnerability of the forint. In its assessment, current monetary conditions remain sufficiently tight, and rate cuts are unlikely in the near term - though they have not been entirely ruled out later this year. We expect the earliest window for a potential easing cycle to open around the turn of 3q and 4q25.

THE WEEK AHEAD:

• In Poland, attention will focus on the implications of the June 1 presidential election outcome. The week kicks off with PMI releases, which we expect to show improvement, supported by a rebound in global industrial momentum. Revised 1q25 GDP data from Poland (Mon), Hungary (Tue), and Romania (Fri) will clarify growth dynamics. The NBP is set to decide on interest rates. Despite favorable inflation data, a strengthening recovery and rising wages are likely to keep the MPC on hold in June. Czechia May CPI (Wed) likely rose toward 2%. Friday brings key industrial and retail figures from the region.