Among these, this week Romania’s central bank made waves with its successful repo auction. They planned to deliver liquidity at a very critical terminal rate of 6.5%. Romania’s change in strategy is a considerable one. The country decided to focus on the repo auction rather than using the credit facility, which has a much higher interest rate of 7.5%. This is uniquely the first repo announcement from Romania since November of 2018. It signals a country looking to assert a greater degree of control over its monetary policy.
The announcement coincides with period in which the Central and Eastern European (CEE) region is experiencing a mixed bag of currency movements. The koruna has been the most volatile CEE currency – down 3% vs. euro on the week. By contrast, the Polish zloty has shown remarkable resilience by appreciating against the euro. These currency shifts take place against the backdrop of a regional economic uptick and in response to aggressive monetary policy easing.
Regional Economic Performance
In Hungary, the government bond subsidizes continue to be attractive for investors, just at a bigger cost. This indicates that even though there is remaining appetite for Hungarian bonds, the price of investment has risen. 1 of 2025 has been extraordinarily bleak for Hungary’s economy. This decline should worry anyone concerned with the country’s future growth prospects. Fitch Ratings is scheduled to reassess Hungary’s rating and outlook tomorrow (Friday). This contributes to the increasing skepticism of the country’s economic house of cards.
Further afield in the region, Slovakia is gearing up to announce important labor market information in tandem with the structure of their GDP. The first quarter unemployment rate will indicate, as analysts predict, historical lows. This may be a sign that our labor market is getting better. Having this data will be immensely important for policymakers, as it will elicit a better understanding of labor shifts and economic well-being.
Long-term yields during the last week in the CEE region have fallen by up to 46 bps. This marked decrease is reflective of broader investor sentiment and expectations around future economic conditions. As countries prepare to release retail sales and industrial output numbers for April, these figures may shed light on consumer behavior and production levels amid fluctuating currencies and changing interest rates.
Upcoming Central Bank Meetings
Attention is focusing too on major upcoming meetings of central banks in the region. On June 5, the European Central Bank (ECB) will meet for what could be a historic rate decision. As lesson learned, they will pay attention to the most recent economic indicators and think about changing monetary policy going forward. Market participants are on the lookout for signals on the direction of future interest rate movements while processing a series of mixed economic data releases.
Poland’s central bank will decide on interest rates Wednesday. Fitch Ratings just announced that they expect the latest cycle of interest rate increases will soon be over. This decision comes at a time when there is a lot of discussion about the threat of inflation. Growth projections are due to be announced at the start of July. The results of these discussions have the potential to shape monetary policy in the entire region going forward.
Future Projections and Economic Outlook
As all countries are heading into their national announcements, the emphasis on ambitious new growth and inflation projections will be key. That data, should it materialize, will provide the world’s central banks with critical information for how to calibrate their next moves on interest rates. The economic picture is far from static, as each of these countries confront different challenges, realities, and opportunities.