Inflation Surprises in Europe’s East Back Case for Rate Hikes
A two hundred euro bank note sits in a display case at the visitor centre at the European Central Bank building in Frankfurt, Germany. (Photographer: Alex Kraus/Bloomberg)  

Inflation Surprises in Europe’s East Back Case for Rate Hikes

(Bloomberg) --

Calls for higher interest rates in eastern Europe are getting a boost from inflation.

While the European Central Bank is struggling to stoke price growth in the euro area, inflation quickened beyond economists’ expectations in Poland, Romania and the Czech Republic last month. In the latter two countries, price growth is above the upper end of the respective central banks’ target ranges.

Inflation Surprises in Europe’s East Back Case for Rate Hikes

The Czechs may be the closest to tightening monetary policy. Central bank Deputy Governor Marek Mora said Monday evening that he “can imagine leaning toward raising interest rates” if signals of an economic recovery abroad persist.

But Poland -- despite producing the region’s biggest inflation shock in December -- looks set to maintain its almost five-year lock on borrowing costs. Romania, meanwhile, remains wary that lifting rates will lure speculative foreign cash.

Read more:

Accelerating Inflation Set to Add Fuel to Czech Rate-Hike Debate

Romanian Inflation Edges Further Beyond Central-Bank Target Band

Poland Defies Inflation Shock in Extending Record Rate Pause

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