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Commerzbank on CEE Inflation

CEE
  • This week, PPI inflation prints (March) from Poland and the Czech Republic surpassed market expectations; both countries recorded scary prints in the 20%-25% territory.
  • Although key drivers such as the crude oil price have pulled back from their peaks of March, it is too early for this to start helping consumer inflation rates.
  • Rather, CPI inflation is likely to accelerate further in the direction of PPI inflation over the coming quarter, before it reaches a potential peak.
  • Granted, some of this will be like a technical follow-through, and if world prices were to ease off, there could be a case for looking through the impulse.
  • Prior to the war, CEE central banks anyway treated inflation as transitory, and they were tightening monetary policy only to ward off second-round effects (on wages) and keep expectations anchored.
  • And as far as this objective goes, the root cause of inflation matters relatively little. Both NBP and CNB are likely to continue with sizeable rate hikes at their respective 5 May meetings: CNB could settle for 50bp, but NBP is more likely to hike by 75-100bp.
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