Diminishing appetite for monetary easing

The appetite for monetary easing in the region has been diminishing. The Serbian central bank kept the key rate steady at 5.75% at its last MPC meeting, extending the period of rate stability for half a year. We still expect the NBS to ease its policy stance by year-end, although we see rising risks for fewer cuts than previously envisaged. The National Bank of Poland also decided to leave rates unchanged last week. Although NBP Governor Glapinski mentioned that the MPC was analyzing the possibility of interest rate cuts in March, he stated that there were currently no reasons for such action. He highlighted inflation risks and presented a rather pessimistic inflation path, while confirming that decisions will be based on incoming data. The new governor of the Hungarian central bank, Mr. Varga, made very hawkish comments in his first official press conference, reacting to unpleasant surprises in February inflation. We have revised our forecast for this year’s average inflation upward to 5.5% from the previous 5%.