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Aided by a retreat in price growth from double digits, some
central banks in the region have started lowering interest
rates, led by Hungary, Poland and the Czech Republic, with
Romania's central bank holding off on rate easing for now.
"The decline of the inflation rate is progressing more slowly in
Romania, Moldova, Montenegro, Hungary, and Serbia than elsewhere
in the CESEE region," International Monetary Fund European
Department Director Alfred Kammer said.
"In general, the underlying inflationary pressures in the region
remain stronger than in advanced economies," he said.
"Many central banks in the region should therefore maintain a
tight monetary stance for longer than, for example, the ECB."
A June rate cut by the ECB is fully priced in by investors and
most policymakers have lined up behind such a move.
In a speech prepared for an economics forum in the Croatian town
of Split, Kammer said government plans to roll back
extraordinary support measures for households and companies this
year and next will help fight inflation by curbing demand.
Kammer said that during the 2021 to 2023 period, there was an
erosion of trust in economic institutions in emerging Europe,
with several central banks facing political interference.
"Let me be clear, central banks need to be able to fulfil their
mandates on inflation. For this, independence is essential.
Interference erodes trust and makes policymaking more costly,"
he said.
Kammer said achieving a soft landing in the region will not be
easy but it is important given the even more daunting task of
boosting emerging Europe's growth prospects in a lasting manner.
Even before the COVID-19 pandemic, the speed of convergence of
emerging European economies towards their advanced European
peers had slowed, he said.
That means countries would typically converge to average living
standards in the EU, excluding emerging European members, only
around 2100, 50 years later than previously projected, he said.
(Reporting by Gergely Szakacs in Budapest; editing by Christina
Fincher)
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