Mixed inflation figures in August

Augusts headline inflation numbers were mixed across the region. In Czechia and in Serbia, inflation rate remained flat compared to July (2.2% y/y and 4.3% y/y). Compared to expectations, however, such development was a surprise to the upside that may result in more cautious approach of the Czech central bankers regarding further rate cuts. In Hungary and Romania, on the other hand, inflation eased. In both countries such development translates into comfort for the central banks to ease monetary conditions further. Finally, in Slovakia, inflation rate increased to 2.8% y/y from 2.6% in July. As for the outlook, Czechia, Hungary, Poland and Slovakia are expected to see headline inflation climbing further in the remainder of the year. Such a development is driven by statistical effects as well as regulatory adjustments. On the other hand, in Romania and Serbia, we should see inflation falling further in the remainder of the year. In 2025, inflation is expected to ease further. At this point, the downside risks to the growth are mounting (Germanys weakness, fiscal consolidation in CEE). If they materialize, they will be disinflationary. On the other hand, there are upside risks stemming from pending adjustment of energy prices (Slovakia) and possible tax increases within fiscal consolidation plans.