Commodity price drop likely to weigh on CEE inflation

The substantial drop in commodity prices seen in recent months is likely to keep annual inflation in the CEE at low levels. At the same time, the improving situation on the labour market, the gradual rise in wages and the willingness of households to spend should gradually push consumer prices higher. 

Nevertheless, this process will take some time. Polish inflation is unlikely to exit negative territory before January 2016, while Hungarian inflation should move back into the black by the end of this year. 

To reach the CB's target, CEE countries have, however, quite long journey ahead. The Czech Republic is likely to be the first country in the region to achieve the central bank's target. 

"The Czech yoy inflation rate looks set to climb above 1% by year-end, while, by next autumn, inflation should reach the CNB's inflation target, on our forecasts", says Societe Generale. 

According to the Hungarian central bank's latest Inflationary prognosis, inflation will fall short of the 3% target both this year and next and may not reach the target before H2 2017.