CEE: Resilient growth meets diverging policy risks
The Central and Eastern European (CEE) region showcases a complex interaction between resilient economic growth and diverging monetary policies among key players. Per the full note , while the Czech National Bank (CNB) is adopting a hawkish stance due to rising inflation risks, the National Bank of Poland (NBP) is maintaining a cautious approach with potential tightening pushed to early 2027. This emerging divergence reflects unique national conditions—Czechia faces immediate inflation pressures while Poland's inflationary dynamics remain largely influenced by external factors. Such marked differences in policy trajectories have implications for currency valuation and trading strategies heading into 2024.
What the desk is arguing
The desk perceives that the CEE region's economic resilience may lead to competitive currency advantages for nations like the Czech Republic, whose CNB is on a tightening path. Meanwhile, Poland's NBP appears hesitant despite inflation outpacing targets, indicating that traders should be vigilant of potential currency volatility stemming from these diverging monetary approaches.
The evidence supporting this view includes the CNB's recent pivot toward hawkishness in response to inflation risks, as well as the NBP's inflation landing at 4.0% year-on-year, exceeding its target range. Notably, the NBP's ongoing wait-and-see stance amid a backdrop of controlled core inflation hints at the complexity of the Polish economic landscape, ultimately informing trader expectations regarding Zloty dynamics.
Where it sits in our coverage
Our consensus target for the EUR/PLN currency pair is set at 1.075, with a range between 1.04 and 1.12, reflecting influential market perspectives from key market players. Specific firm targets include: - jpmorgan: 1.10 by Mar-26 - bofa: 1.04 by Mar-26
This desk's stance is aligned with jpmorgan’s target, positioned at the upper end of the consensus range, indicating confidence in the Czech currency due to the CNB's hawkish policy.
How other firms see it
In the current landscape, aligned firms include jpmorgan, which echoes the desk's sentiment on Czech resilience leading the charge, and bofa, which holds a slightly contrasting view focusing on the long-term potential of the Polish Zloty amid pending economic pressures. This divergence underscores a split market perception of the CEE currencies' trajectories.
Market participants should keep an eye on how domestic inflation metrics interplay with external economic influences, particularly the EUR/USD rates, as shifts in central bank policy could elicit further volatility in currency pairs connected to the CEE region.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01CEE growth remains robust, but monetary policies are increasingly divergent.
- 02The CNB is adopting a hawkish stance while the NBP remains cautious into 2027.
- 03Traders should monitor inflation developments in both Czechia and Poland for currency implications.
- 04Policy divergence may create trading opportunities or risks in the CEE currencies.
Market implications
Watch the EUR/PLN pair closely as divergence in monetary policy becomes clearer, particularly with inflation data affecting trader sentiment. The current levels around 1.075 could prove pivotal for establishing fresh positioning into year-end as central bank meetings unfold.
Risks to this view
A sudden shift in inflation trajectory or economic forecasts could invalidate this outlook. Specifically, should Poland’s inflation accelerate due to unforeseen supply shocks, the NBP may adjust its policy stance sooner than anticipated, impacting Zloty valuation significantly.
Articles CEE: Resilient growth meets diverging policy risks Published 09:50 Czech Republic Hungary Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download CEE economies remain resilient to the global supply shock, but policy paths are diverging. The CNB is turning more hawkish as inflation risks rise, while the NBP eyes 1Q27 rate hikes. Hungary awaits a credibility boost from fiscal consolidation, while Romania's improving fiscal position remains overshadowed by political uncertainty and reform risks Frantisek Taborsky , Rafal Benecki , David Havrlant , Peter Virovacz and Stefan Posea Central Europe is navigating resilient growth, persistent inflation risks and increasingly divergent monetary policy paths Poland: NBP holds its nerve, but 1Q27 tightening still on the cards The National Bank of Poland (NBP) remains patient on monetary tightening and continues to postpone rate hikes, even as major central banks have already begun raising interest rates.
Although CPI inflation accelerated to 4.0% year-on-year in September, moving not only above the central bank’s target but also beyond the upper limit of its tolerance band (2.5%; +/- 1 percentage point), price growth remains largely driven by higher fuel costs. Core inflation excluding food and energy has changed little since the beginning of the year, and the recent rise in inflation is primarily the result of an external supply-side shock that is beyond the reach of domestic monetary policy. There are still no clear signs of broader inflationary pressures or second-round effects.
Wage growth also continues to moderate. By the end of 2026, fuel price pressures should be contained by fiscal measures, including lower excise duties on petrol and diesel and a reduction in VAT on fuels from 23% to 8%. These measures could even be extended until the end of February 2027, while a high base effect from fuel prices will begin to weigh on annual inflation from March next year.
Nevertheless, the prolonged energy crisis increases the risk of higher inflation over the medium term. Regulated natural gas and electricity prices are likely to rise from the beginning of 2027, while favourable developments in food markets appear to be reversing. We therefore expect two 25bp rate hikes by the Monetary Policy Council (MPC) in 1Q27, which would lift the main policy rate to 4.25%.
The November NBP staff macroeconomic projection may mark the start of the rate-hike debate among Polish policymakers, particularly if it points to persistently elevated inflation around the turn of 2026-27 or evidence of second-round effects. Meanwhile, Poland faces a paradox: robust economic growth alongside fragile public finances. Czech Republic: Accelerating prices amid decelerating growth Headline inflation has just started to climb and is expected to hit around 4% in February, as renewed price growth in the regulated and food segment combines with persistently elevated fuel prices and core inflation.
Part of the surge may be attributed to the low comparison base from early 2026, but we believe that the second-round effects from the Hormuz conflict are starting to materialise as the turmoil becomes more persistent. In a textbook response to a major global supply shock, the economy is facing a period of elevated inflation, including spillovers beyond energy into other price categories, alongside a deceleration in economic activity. We expect economic growth to slow to around 1.8% this year before only gradually picking up thereafter.
Real wage growth will be dampened by the surge in inflation, while rising mandatory expenses for food and energy will put a strain on household budgets. Furthermore, pressure on profitability will likely prevent excessive nominal wage gains over the upcoming year, as input costs continue to rise amid intense competition. The weaker koruna contributes to galloping import prices, and the CNB is starting to monitor the extent to which the exchange rate loosens overall monetary conditions.
Combine the outlook for forceful imported inflation with the still-robust domestic price pressures, and you end up with a recipe for a higher policy rate needed to prevent inflation from getting out of hand for longer. As FX comes into the spotlight, the steps of the Fed and the ECB may shape the CNB reaction to a greater extent than before. The more hesitant the ECB becomes due to the fragile French fiscal situation, the more it may work in favour of the koruna.
Hungary: Credibility is the next catalyst The Hungarian economy continues to move away from its prolonged stagnation, although the recovery is still far from spectacular. GDP has now expanded for five consecutive quarters, and we expect growth of 1.9% this year, driven mainly by consumption. Investment remains the missing piece, while net exports are still a drag, although new industrial capacities are increasingly supporting exports.
Inflation, meanwhile, continues to surprise on the downside. Despite higher fuel prices, a weaker forint and elevated wage costs, headline inflation reached just 1.6% in September, while core inflation fell to 1.9%. We now expect average inflation of only 1.8% this year and around 3% in 2027.
The new 2.5% inflation target from 2028 could provide an additional anchor for price-setting decisions. This benign inflation backdrop leaves room for further monetary easing, but the external environment remains the key constraint. After pausing at 5.50% in September, we expect the National Bank of Hungary to deliver another 25bp interest rate cut in December, followed by a further 100bp of easing in 2027.
Before that, however, fiscal policy could provide the next major catalyst for Hungarian assets. We expect a credible, front-loaded medium-term consolidation plan, accompanied by the first official steps towards ERM II. If policymakers deliver, the resulting decline in Hungary’s risk premium could push EUR/HUF towards 350-355 in the short term and trigger another leg of the bond rally.
Thereafter, renewed monetary easing should put the forint on a mild depreciation path, but with credibility improving, external balances strengthening and the euro adoption narrative increasingly acting as a policy anchor, we see Hungary entering a new phase of convergence. Romania: Politics remains on the front page Stagflationary pressures and political uncertainties continue to dominate the Romanian macro story. Detailed GDP figures for the second quarter confirmed that private consumption was the main culprit, while investments provided one of the strongest positive contributions to growth on record, on the back of accelerating Recovery and Resilience Facility-related investments.
Concerning price pressures, we expect inflation to end the year at 6.5% and average 8.5% throughout 2026, with potential upside risks. While an investment-driven third quarter is on the cards as well, a continuation of public investment activity through other EU programmes like SAFE and Cohesion funds means that new capital formation should moderate but not fall off a cliff after RRF ends. On the fiscal front, the deficit remains the key positive element supporting Romania’s credit story.
As of August, the fiscal balance stood at 2.89% of GDP (vs 4.50% in August 2025). A year-end value of 6.0% or less is within reach. Meanwhile, governance continues to be in “interim” mode, with agreements for a government formation still proving difficult to reach.
Escaping the downgrade threat in early October remains a key short-term win, although many must-do reforms continue to be on borrowed time. A fully empowered government and a credible medium-term fiscal framework remain necessary to reduce the risk of a downgrade. Romanian industry Poland zloty Hungary Czech Repulbic Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.
The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Frantisek Taborsky EMEA FX & FI Strategist Frantisek is an FX & FI Strategist covering EMEA markets, having joined the bank in 2022. He provides short- and medium-term recommendations for ING's corporate and institutional client… Rafal Benecki Chief Economist, Poland Rafal Benecki is a Chief Economist at ING in Poland, joining in 2005.
Prior to this, he was the head of the Economic Analysis Bureau at Millennium Bank in Warsaw. He has an MSc in Financial… David Havrlant Chief Economist, Czech Republic David joined ING in 2024 as Chief Economist for the Czech Republic. He gained professional experience at the Czech National Bank and international institutions such as the ECB, the EC,… Peter Virovacz Chief Economist, Hungary Peter Virovacz is a Chief Economist in Hungary, joining ING in 2016.
Prior to that, he has worked at Szazadveg Economic Research Institute and the Fiscal Council of Hungary. Peter studied at the… Stefan Posea Economist, Romania Stefan is an economist based in Bucharest covering Romania, Bulgaria, Serbia and Croatia. He joined ING in September 2023, having previously worked at FocusEconomics.
Stefan holds an MSc in… In this article Poland: NBP holds its nerve, but 1Q27 tightening still on the cards Czech Republic: Accelerating prices amid decelerating growth Hungary: Credibility is the next catalyst Romania: Politics remains on the front page
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