This week, the spotlight is on central bank meetings in Poland, Czechia, and Serbia. The Czech central bank’s decision is particularly intriguing, as the size of interest rate cuts is uncertain. There’s a slightly higher probability of a 25-basis point cut, with caution likely until January’s inflation data is assessed. Poland and Serbia are expected to keep interest rates unchanged. Serbia might delay monetary easing until the second half of the year. Hungary’s inflation data will be closely watched, and various CEE countries will release data on retail and industry sectors. Serbia might witness a positive outlook change in Fitch’s upcoming revision.

FX Market Update

Last week saw the Hungarian forint and Polish zloty strengthen about 1% against the euro, while the Czech koruna weakened. Hungary’s currency gained after a smaller-than-expected interest rate cut and positive EU support for Ukraine. Czechia’s central bank meeting this week may lead to a 25 or 50 basis point rate cut, with caution likely due to January’s inflation data. No monetary easing is anticipated in Poland and Serbia. Serbia might postpone rate cuts until the second half of the year.

Bond Market Overview

CEE government bond yields followed global trends, declining notably in Czechia, Poland, and Hungary last week. This week, Slovakia will offer new bonds in an extraordinary auction, Romania plans to reopen bonds and issue T-bills, Hungary announces T-bill issuance, and Serbia reopens its 2031 bond.

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