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 22.4% in Estonia, 21.8% in Latvia and 22.0% in Lithuania.

The high inflation environment is forcing central banks to raise interest rates. Hungary has the highest effective interest rate (overnight (O/N) deposit rate: 18.0%) in the region, following the October move by the Hungarian central bank.

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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