CEE FX: Hawkish holds and cautious easing path – Societe Generale

Central banks in Central and Eastern Europe (CEE) are expected to maintain or cautiously adjust interest rates amid persistent inflation and political uncertainties. Societe Generale strategists forecast a hawkish stance from Poland’s National Bank of Poland (NBP) with no change to the 3.75% rate, while Romania’s National Bank of Romania (NBR) is projected to keep the rate at 6.50%.

In Poland, inflation remains high, fueling concerns of further tightening, whereas Romania's elevated price pressures and political instability suggest a more cautious approach. The next rate cut in Romania is anticipated only in the first quarter of 2027 if inflation decreases and political stability returns.

The NBP is expected to hold rates at 3.75% on Wednesday, with policymakers emphasizing the need to prevent inflation from becoming entrenched. The central bank may add a further 25 basis points in January if the November staff projections confirm elevated inflation levels.

In Romania, the central bank is expected to maintain its current rate of 6.50% on Thursday. While inflation is gradually easing, political uncertainty, FX volatility, and elevated price pressures limit the potential for rate cuts. Policymakers are likely to remain cautious and signal patience until the situation stabilizes, with the prospect of the next cut in Q1 2027.

The article also notes that AUD/USD faces selling pressure and is trading near 0.6900 due to renewed US Dollar strength, while USD/JPY has recovered to 158.00. The US Dollar remains strong, supported by geopolitical uncertainty and expectations of further rate hikes by the Federal Reserve, despite fading hopes of an immediate hike. Meanwhile, gold is consolidating below $4,150, and BNB is edging lower after three consecutive weekly gains.