A busy week awaits, as three regional central banks are due to review their monetary policy. The Polish central bank starts the string of meetings with its sitting on Tuesday which should bring another hike of 50bp, thus raising the key rate to 2.75%. Romanian NBR follows the next day and the bank is likely to stick to its gradual pace of 25bp increases. We expect this week’s rate to be raised to 2.25% and then further rate hikes of 25bp each are foreseen afterward, with the terminal rate for the cycle being reached at 3% by mid-2022. Hence, the credit facility rate should reach 4% by mid-2022, and likely become the relevant operational instrument. Serbian central bank, which meets on Thursday, is anticipated to stick to its 1% key rate as long as the reverse repo rate is below that level (currently, the repo rate stands at 0.71%). Given the pace of recent repo rate hikes, it may match the key rate at the end of March or in early April; thus we expect the first hike in April or May at the latest. Inflation prints for January will be released in Slovenia and Hungary. We expect inflation to have remained elevated at 5% y/y and 7.5% y/y in the two countries, respectively, with strong repricing behavior likely at play, too. Moreover, industrial production prints for December are due for Slovakia, Czechia and Slovenia. With some potential easing of supply-side issues at year-end, the industry may have grown by 1.3-2% year-on-year in Czechia and Slovakia, and by a brisk 6% y/y in Slovenia.
FX market developments
The EURUSD has been quite volatile over the past two weeks. While the statements by Fed Chairman Powell at the end of January increased the risks of rapid monetary tightening during the coming months, which pushed the EURUSD toward 1.11, the press conference of President Lagarde following the ECB meeting just over a week later and the ECB’s concern about the renewed rise in inflation weighed on the US dollar as it moved to 1.1450 vs. the EUR. The strong swings in the EURUSD affected CEE currencies as well. The Hungarian forint and the Polish zloty continued to appreciate and moved to 354 vs. the EUR and 4.54 vs. the EUR, respectively. Ahead of last week’s rate-setting meeting in Czechia, the koruna briefly touched 24.10 vs. EUR but pared the gains as the central bank acted in line with expectations and raised the key rate by 75bp to 4.5%. In our view, the current level of the EURCZK corresponds to fundamentals and we expect the currency to fluctuate around 24.40 vs. the EUR until the end of the year. This week, three central banks hold their rate-setting meetings. While the National Bank of Serbia is expected to remain on hold, the National Bank of Poland and the National Bank of Romania will raise their key rates once again. We foresee a 50bp increase to 2.75% in Poland and a milder hike by 25bp to 2.25% in Romania. Although the NBS will most likely keep the key rate unchanged this week, we expect the first rate hike to be delivered in April-May as the central bank will run out of ammunition on the repo rate, which currently stands at 0.71%. We see the key rate at 2.0% by year-end in Serbia.
Bond market developments
The ECB meeting and the statements by President Lagarde during the press conference were ‘the’ event of last week. As President Lagarde at least put the tightening of monetary policy this year into the realm of possibility, the German Bund curve shifted considerably up by about 25bp. While the 2Y yield moved to -0.28%, the 10Y yield increased to almost 0.2%, the highest level since the beginning of 2019. Hence the spreads against 10Y Bund narrowed considerably by about 30-50bp in Czechia to 295bp, in Poland to 365bp and in Hungary to 466bp. In Romania, the long end somewhat underperformed as the 10Y yield climbed above 5.5% following the announcement of the issuance calendar for February and last week’s bond auction. As a result, the spread between 10Y ROMGB and 10Y German Bund remained broadly stable at about 540bp.
This document is intended as an additional information source, aimed towards our customers. It is based on the best resources available to the authors at press time. The information and data sources utilised are deemed reliable, however, Erste Bank Sparkassen (CR) and affiliates do not take any responsibility for accuracy nor completeness of the information contained herein. This document is neither an offer nor an invitation to buy or sell any securities.
Recommended Content
Editors’ Picks

Gold hovers around all-time highs near $3,250
Gold is holding steady near the $3,250 mark, fuelled by robust safe-haven demand, trade war concerns, and a softer-than-expected US inflation gauge. The US Dollar keeps trading with heavy losses around three-year lows.

EUR/USD retreats towards 1.1300 as Wall Street shrugs off trade war headlines
The EUR/USD pair retreated further from its recent multi-month peak at 1.1473 and trades around the 1.1300 mark. Wall Street manages to advance ahead of the weekly close, despite escalating tensions between Washington and Beijing and mounting fears of a US recession. Profit-taking ahead of the close also weighs on the pair.

GBP/USD trims gains, recedes to the 1.3050 zone
GBP/USD now gives away part of the earlier advance to fresh highs near 1.3150. Meanwhile, the US Dollar remains offered amid escalating China-US trade tensions, recession fears in the US, and softer-than-expected US Producer Price data.

Bitcoin, Ethereum, Dogecoin and Cardano stabilze – Why crypto is in limbo
Bitcoin, Ethereum, Dogecoin and Cardano stabilize on Friday as crypto market capitalization steadies around $2.69 trillion. Crypto traders are recovering from the swing in token prices and the Monday bloodbath.

Is a recession looming?
Wall Street skyrockets after Trump announces tariff delay. But gains remain limited as Trade War with China continues. Recession odds have eased, but investors remain fearful. The worst may not be over, deeper market wounds still possible.

The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.