Hungary to keep rates stable
The Hungarian central bank will hold a rate-setting meeting on Tuesday, and we expect stability of rates given recent inflation development. Poland will release data on industry and retail for June, allowing us to already see economic performance in the whole second quarter of 2025. On top of that, we will also see labor market data, in particular wage and employment growth in June as well as the unemployment rate. Labor market data will also be published in Croatia and Hungary (unemployment rates in June) as well as in Serbia (wage growth in May). In Romania, the Constitutional Court is to decide on the fiscal package, but we do not expect any controversial ruling. The motion was filed after the opposition did not succeed with the no-confidence vote. Finally, on Friday after market closes, Fitch Ratings will publish its rating and outlook review for Serbia - we expect no change.US Fed will not cut key interest rates
The US Federal Reserve's interest rate-setting committee will meet next week. Although US President Trump has recently stepped up his verbal attacks on Fed Chairman Powell and called for rapid and significant interest rate cuts, we do not expect any change in interest rates. With both the economy and labor market proving quite resilient, the Fed is likely to take its time to observe and assess the initial effects of the new tariff regime. We expect further interest rate cuts of 25bp each only in September and December.CEE Special Report: How to remain competitive?
Over the last decade, most of the CEE countries experienced cumulative real productivity growth in double-digits, with Romania, Serbia and Poland even approaching 30%. More importantly, real productivity gains exceeded the real labor cost increases in most of the CEE countries. Productivity gains are part of the convergence pattern, but there is still room for catching up. Relative competitiveness is intact, as labor costs remain lower compared to EU27. In other words, the CEE region still offers a cost advantage, i.e. low labor costs compared to productivity levels. From that perspective, Romania remains a sweet spot: low labor costs compared to a decent productivity level relative to the EU average.Bank stress test with special features
According to the ECB, the 2026 bank stress test has two special features: Instead of economic shocks and market disruptions, this time the focus is on the resilience of financial institutions to geopolitical risks and global power shifts. In addition, input and output parameters will be swapped. This will require banks to take on more responsibility and to give greater consideration to the potential impact of geopolitical developments in their risk management. With the same objective in mind, there are also plans for a Europe-wide stress test for non-bank financial intermediaries in 2026.Tariffs move currency markets
The German economic stimulus package and rising defence spending in the eurozone recently caused the euro to strengthen against the US dollar. EURUSD is likely to remain volatile but consolidate at a significantly higher level. The yen also appreciated strongly against the dollar. However, the yen weakened slightly against the euro. The Swiss franc appreciated significantly against many currencies following the tariff announcements. The SNB is likely to cut its key interest rate to 0% at its next meeting, which should not support the CHF and allow the euro to recover.Success for AI ecosystem
In the current second-quarter reporting season, the proportion of positive earnings surprises was highest in the communications services and technology sectors. Arista Networks, for example, increased its revenue by 28% y/y in the first quarter. The tech group is on track to create a cross-vendor ecosystem that enables control and coordination between AI networks and AI computing infrastructure. This will ensure that revenue growth remains above average in the medium term. The operating margin significantly exceeds that of its competitors.US Fed will not cut key interest rates
The US Federal Reserve's interest rate-setting committee will meet next week. Although US President Trump has recently stepped up his verbal attacks on Fed Chairman Powell and called for rapid and significant interest rate cuts, we do not expect any change in interest rates. With both the economy and labor market proving quite resilient, the Fed is likely to take its time to observe and assess the initial effects of the new tariff regime. We expect further interest rate cuts of 25bp each only in September and December.
