July’s inflation up in several CEE countries

Across the region, we have seen inflation increase in July in most of the CEE countries. There are only two exceptions: Croatia and Slovenia, where Julys inflation eased compared to June. In all other cases, we have seen it rise, and in many cases more than expected. In Romania, for example, inflation accelerated to 5.4% year-on-year in July, from 4.9% year-on-year in June, mostly due to costlier energy prices after a fuel excise duty hike. However, we see it as a temporary pick-up, with inflation resuming its downward trend thereafter. In Poland, July's inflation increased to 4.2% year-on-year (1.4% month-on-month), well above June's footprint of 2.6% year-on-year. The jump happened primarily due to the deregulation of energy prices. In Poland, as opposed to Romania, inflation is projected to rise towards 5% year-on-year, mainly due to the unfavorable base effect in the rest of the year. Similar development is expected in Hungary after Julys inflation went up to 4.1% year-on-year. In Czechia, the relatively significant monthly inflation (0.7% month-on-month and 2.2% year-on-year) can be primarily attributed to a hike in holiday prices, a typical seasonal effect for this period. Additionally, a rise in service prices was observed, indicative of robust household demand. Finally, in Serbia, Julys inflation surprised to the upside, landing at 4.2% year-on-year, while in Slovakia, the inflation rate is expected at 2.5% year-on-year (local release), in line with flash HICP estimate showing an upward trend in July.