Regional markets are closed today for a holiday, and the markets will have a chance to quietly absorb the busy schedule of the previous days. As expected, inflation in Poland fell from 4.9% yesterday to 4.2% in April. We estimate that core inflation eased to 3.4-3.5% year-on-year. Overall, it seems that the National Bank of Poland has an open path for a rate cut next week and may start with 50bp, which is our baseline and market pricing.
In the Czech Republic, the blackout period ahead of next week’s Czech National Bank meeting started yesterday, and from the Board’s communication, it seems that another pause will be discussed. This is supported by the 1Q25 GDP release yesterday, which was stronger than the CNB expected. However, April inflation will be released the day before the meeting, and we estimate it at 2.2%, which should still be enough for a rate cut. That said, any upside surprise could swing the odds in favour of a pause in the cutting cycle.
In Hungary, on the other hand, 1Q25 GDP surprised significantly to the downside, and the economy is back on the brink of recession after a quarter of recovery. While this supports the dovish direction of the current story, we believe it is not a game-changer for the National Bank of Hungary given the tricky inflation profile. April inflation is likely to fall below 4% due to government measures and base effects, but the next few months will again show higher numbers. It was inflation expectations that the NBH mentioned as a major focus at Tuesday’s meeting, along with the global story and trade wars.
Frantisek Taborsky
