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Written by Gergely Zakacs
(Reuters) – Underlying inflation in central, eastern and southeastern Europe is stronger than in developed countries, with many central banks in the region saying they will need to maintain tighter monetary stances for longer than the European Central Bank. , said a senior IMF official.
With the inflation rate falling back from double digits, some central banks in the region, led by Hungary, Poland, and the Czech Republic, have begun lowering interest rates, and Romania’s central bank has postponed interest rate cuts for the time being. .
“Inflation rates in Romania, Moldova, Montenegro, Hungary and Serbia are declining more slowly than in the rest of the CESEE region,” said International Monetary Fund European Director Alfred Comer.
“In general, underlying inflationary pressures in the region remain stronger than in developed countries,” he said.
“Many central banks in the region will therefore need to maintain tight monetary stances for a longer period of time than, for example, the ECB.”
A rate cut by the ECB in June has been fully priced in by investors, and most policymakers support such a move.
In a speech prepared for an economic forum in the Croatian town of Split, Comer said the government plans to scale back extraordinary support for households and businesses this year and next, helping to curb inflation by curbing demand. said it was helpful.
Comer said that between 2021 and 2023, confidence in the economic institutions of Europe’s emerging economies eroded and several central banks faced political interference.
“Let’s be clear: central banks need to be able to meet their inflation responsibilities. To do that, independence is essential. Interference undermines trust and makes policymaking more costly,” he said.
Achieving a soft landing in the region will not be easy, Comer said, but it is important given the even tougher challenge of sustainably boosting the growth prospects of Europe’s emerging economies.
He said that even before the COVID-19 pandemic, the rate at which emerging Europe was converging towards developed Europe was slowing.
This means that countries, with the exception of emerging European member states, will typically converge to average living standards within the EU around 2100, 50 years later than previously predicted, he said. .
(Reporting by Gergely Szaccs in Budapest; Editing by Christina Fincher)
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