Feb 13 • 14:00 UTC 🇩🇪 Germany FAZ

Monetary Policy Thaw: Curbed Inflation Fuels Hope for Interest Rate Cuts in the East

In Eastern Central Europe, higher interest rates than in the Eurozone are showing signs of decline, raising hopes for potential rate cuts by 2026.

In Eastern Central Europe, interest rates remain significantly higher than in the Eurozone, though there are indications that they may decrease by 2026. Inflation rates in Eastern and Southeastern Europe are showing a downward trend, yet central banks in countries outside of the Eurozone, such as Poland, the Czech Republic, Hungary, and Romania, have kept their key interest rates high, often exceeding the Eurozone's benchmark of 2%. The continued high rates reflect a cautious approach to monetary policy amid economic uncertainties.

Only in Kyiv has the central bank decided to lower the interest rate, bringing it down to 15%. This move aligns with the challenging economic conditions in Ukraine, which has been heavily affected by the ongoing war. The current situation illustrates the diverging paths of monetary policy in Eastern Europe compared to the Eurozone, where economic stability and lower inflation have allowed for more supportive financial measures.

As inflation continues to ease, there is growing optimism that the central banks in Eastern Europe may eventually follow suit and implement interest rate cuts in the near future, which could support economic recovery and investment in the region. The implications of such changes would be significant, impacting local economies and influencing the broader European financial landscape.

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