Inflation is still above target in most of CEE

Slovakias release of inflation rate (at 3.7% y/y in April) completes the price developments in April for the whole region. Apart from Romania and Slovenia, headline inflation eased in other countries. In Romania inflation stagnated compared to the previous month, which we consider a surprise to the upside. Due to this fact, and in order to account for a more frontloaded depreciation of Romanian leu, we revise up our year-end inflation forecast at 4.0% y/y from 3.7% y/y. This is in a no tax change scenario. In other CEE countries, inflation is slowly declining, and the recent drop of energy prices is a positive factor for price development. Despite an easing trend, the inflation rate remains above the central banks target in all countries but Czechia. Inflation in April declined to 1.8% y/y in Czechia, the lowest year-on-year inflation figure since March 2018 and marginally below the 2% central bank target. The central bank points to the elevated inflation of services that should warrant cautious approach regarding monetary policy. In the months to come, external factors such as low energy prices should help inflation to remain contained. Expectations for slower growth globally will limit the demand pressure as well.