The sharpest monetary erosion was in the Baltic countries and Central and Eastern Europe. According to the Harmonised Index of Consumer Prices (HICP), consumer prices rose by 25.2% in Estonia, 20.8% in Latvia and 21.1% in Lithuania.

The inflation environment caused by the war is forcing central banks to raise interest rates. Hungary has the highest base rate in the region (13.00%), following the central bank’s September rate hike (125 basis points).

In an environment of higher interest rates and higher inflation, there is a trend towards a preference for premium Hungarian government bonds with above-inflation yields over those with fixed yields.

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