Rising energy prices remain the biggest problem in Europe

In September 2022, inflation risks continued to rise both globally and in Central and Eastern Europe. This is mainly due to falling but still high energy prices, disrupted supply chains and, crucially, the consequences of the increasingly protracted war between Russia and Ukraine.

Nov 2, 2022

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.

The full report can be downloaded here:

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