Rising probability of a diplomatic solution of the Syrian crisis helps riskier assets including CEE currencies. The Polish zloty, the Czech koruna, as well as the Hungarian forint strengthened yesterday, in spite of domestic political instability.
Bond prices, including Central European ones, on the contrary, suffered. We expect that Syrian developments will remain in focus. Besides them, there are also macroeconomical data to be released today – Czech and Polish current account as well as Hungarian inflation. According to the central statistical office, inflation in Hungary fell sharply in August (to 1.3% y/y from 1.8% y/y in July), far below the market consensus. Reduced prices of electricity, gas and other fuels, water charges and sewerage as well as consumer durable goods and clothing and footwear were the main reason for the surprisingly low annual price increase. The lower than expected inflation might spur doves in the NBH to reduce the bank´s base rate at the next meeting on September 24. The current rate is at 3.80% and we believe that central bankers would be willing to continue with monetary easing. Nevertheless, its timing will be highly dependent on situation at global financial markets, as the NBH frequently stresses in their Minutes. The forint exchange rates matters to NBH mainly because of huge amount of foreign currency denominated loans.
It is also worth mentioning that the governor of the NBH is going to hold a press conference today (which is a rare phenomenon) on the extension of NBH’s Lending for Growth Programme. Under this programme, small and medium size enterprises are provided with cheap loans in order to help economy recover. The programme had started in April and was already extended due to strong demand.