On the radar

• Industrial output contracted -1.9% y/y in November, while in Slovenia it declined by -0.8% y/y

• Today, the Serbian central bank holds the rate setting meeting and we expect no change in policy rate.

• In the morning, inflation rate in Czechia will be published for December, while in Croatia producer prices will be released.

Economic developments

In the third quarter of 2023, house prices fell by 2.1% YoY in the Euro area and by 1.0% YoY in the EU. However, in the CEE region, the average growth in house prices was positive, arriving at 3.6% YoY. Despite this, the growth dynamics of house prices visibly slowed from the peak that was reached in the first half of 2022, which saw slightly above 16% YoY increase in prices. Looking at individual countries, house prices declined in Czechia and Slovakia for the second consecutive quarter. In Hungary, growth of house prices slowed visibly to 1.5% in 3Q23 from over 20% growth dynamics at the beginning of 2022. On the other hand, in Croatia, house prices continue to grow by more than 10%, while in Poland, house price growth has been single-digit but has accelerated over the last couple of quarters as the government offers different forms of help to support apartment purchases.

Market developments

Today, the Serbian central bank holds its rate-setting meeting, and we do not anticipate any change in the key interest rate that is currently at 6.5%. On Wednesday, Polish Governor Glapinski held a press conference after keeping the policy rate flat at 5.75%. Surprisingly, he did not rule out a potential interest rate hike if upcoming inflation and growth projection (due in March) would show a surge in headline inflation. At the same time he does not see it as a very likely scenario. Moreover, on the FX market, we have seen CEE currencies strengthening against the Euro since the beginning of the week, while the bond market showed mixed performance. Long-term yields went down more visibly in countries such as Hungary, Poland, or Romania.

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