CEE Macro Weekly: Monetary policy calm in CEE

Download report

TOP MACRO THEME(S):

• Inflationary Christmas gifts in the region (p.3) – November inflation readings brought positive surprises in most of the CEE. The common source of the lower than expected inflation were food prices, while core inflation remains rather sticky.

WHAT ELSE CAUGHT OUR EYE:

• POL: The value of mortgage loan inquiries increased by 50.3% y/y in November, although it was 13.6% lower than in October. The average value of a requested mortgage loan amounted to PLN 476.5k in November, representing an increase of 9.2% y/y. A total of 37.06k people applied for a mortgage last month, 37.6% more than a year earlier. According to Credit Information Bureau (BIK), interest in financing home purchases with bank credit is rising alongside subsequent interest rate cuts. At the same time, the average value of mortgage loans applied for continues to increase. Very strong sentiment in the mortgage market is reflected in October loan disbursements totalling PLN 10.86bn, marking a record-high monthly volume of mortgage lending. This figure exceeded the previous record set in September by PLN 191m. Such a high level of lending activity could allow total mortgage disbursements to surpass PLN 100bn for the full year, which would represent a historic annual record (on BIK data).
• POL: Recent comments by members of Poland’s MPC suggest that they see room for further interest rate cuts, though not necessarily as early as January. I.Duda assessed that the scope for additional easing is limited, and would involve lowering the reference rate only to 3.75–3.50%. In her view, January would not be an appropriate time for another decision, with March more frequently mentioned in discussions, when a new projection and a fuller set of data will be available. I.Dabrowski stated that economic data and outlook support further rate cuts, but argued that at the start of the year the Council should refrain from making decisions, as delays in data publication increase uncertainty. In his opinion, under favourable conditions and over a longer horizon, interest rates in Poland could fall to 3% or even lower. L.Kotecki believes that a January rate cut is not possible, given the likely increase in inflation, and that it would be better to wait until March or April. P.Litwiniuk sees only minimal remaining room for rate cuts, provided that the economic environment and key parameters do not deliver significant negative surprises.
• HUN: Fitch Ratings maintained Hungary's sovereign rating at BBB but downgraded the rating outlook from stable to negative, citing deteriorating public finances are main reason for the outlook downgrade.
• ROM: Prime Minister I.Bolojan allegedly considers refraining from raising the minimum wage in 2026 (currently it stands at 4050 RON per month), according to government sources cited by Hotnews.ro.
• CZE: President P.Pavel appointed Babis (ANO) as prime minister. Newly appointed PM said that the new government may be appointed next week, but refrained from committing to any specific timeline.

THE WEEK AHEAD:

• In Poland we will get to know activity data for November that would likely confirm that the economy has remained on the growth path.
• Both CNB and MNB are expected to keep interest rates unchanged.