MNB Cuts 25bp as CEE Yields Slide

Market Snapshot

Asset	Level	Change
BIST 100	13,974.10	-0.69%
iShares Poland	40.35	-0.71%
EUR/PLN	4.33	-0.12%
EUR/HUF	362.18	+0.23%
EUR/CZK	24.18	-0.01%
USD/TRY	47.22	+0.07%
Brent Crude	92.20	+1.31%
Gold	4,135.60	+1.58%
Bitcoin	65,818.13	+0.90%
Poland 10Y Govt Yield	5.51%	-4.01%
Hungary 10Y Govt Yield	5.26%	-6.90%

Prior Economic Events

Data	Prior	Cons	Actual
Central Bank Interest Rate Decision	6	5.75	5.75

Today's Economic Events

Data	Prior	Cons	Time
Business Confidence Index	103.50	-	23:00
Consumer Confidence Index	87.90	-	23:00
Headline Unemployment Rate	5.90	5.80	23:30
TCMB Interest Rate Decision	37	37	03:00

MNB delivered the expected 25bp cut to 5.75%, with the forint holding near 362 versus the euro.
Hungarian and Polish 10-year yields fell sharply, down 6.90% and 4.01% respectively amid thin summer volumes.
BIST 100 and Polish equities declined 0.69% and 0.71% while Brent crude rose 1.31% to $92.20.

Yesterday's Recap

Hungary’s central bank cut its policy rate by 25bp to 5.75% as scheduled, with the committee citing cooling price pressures and stable forint conditions. The decision aligned with market expectations and triggered a 6.90% drop in the 10-year government yield to 5.26%. EUR/HUF rose modestly 0.23% to 362.18 while EUR/PLN eased 0.12% to 4.33.

Polish equities fell 0.71% and the BIST 100 slipped 0.69%, reflecting profit-taking in thin volumes. NBP confirmed continued gold purchases in June, adding to reserves as Russia reduced holdings. Broader CEE fixed-income markets benefited from the MNB move, with Hungary’s 5Y CDS tightening alongside Poland’s.

No major data releases emerged from the Czech Republic or Romania. Poland’s economy shows readiness for renewed expansion according to Colliers, supported by EU fund inflows and manufacturing resilience. Energy import dependence remains a shared vulnerability across the region, with Brent’s 1.31% gain adding to import costs for all five economies.

Hungary’s forint stability post-cut suggests markets view the easing cycle as measured and data-dependent.

The Day Ahead

Turkey will release its Business Confidence Index and Consumer Confidence Index tonight, providing fresh readings on domestic demand ahead of tomorrow’s TCMB decision. Markets expect the central bank to hold the policy rate at 37%. Poland’s headline unemployment rate is due at 23:30 ET with consensus pointing to a 0.1pp decline to 5.8%.

The TCMB meeting itself carries medium impact and is expected to maintain the current tight stance given still-elevated inflation. No other high-impact releases are scheduled for the Czech Republic, Hungary or Romania. Regional FX desks will monitor any signals on reserve-requirement tightening from Ankara.

Romania continues to run a wide trade deficit that keeps BNR on hold despite euro-area convergence progress. Czech retail sales momentum remains consistent with gradual CNB easing aligned to ECB moves.

Other Economic Notes

The ECB deposit rate stands at 2.25% while Eurozone CPI printed 2.80% y/y and unemployment held at 6.20%. These levels anchor expectations for CNB and MNB policy convergence toward the euro-area path. <i>↓ p.2</i>

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Other Economic Notes (continued)

Brent’s advance to $92.20 raises imported inflation risks for energy-dependent CEE economies. Gold’s 1.58% surge to $4,135.60 reflects safe-haven demand that may support NBP’s ongoing reserve accumulation. Broader equity sentiment stayed cautious, with Bitcoin adding 0.90% but regional indices lagging.

US data showing a still-strong economy limits the scope for aggressive ECB cuts and thereby caps near-term relief for Hungarian and Polish yields. Geopolitical tensions around Red Sea routes add further upside pressure to energy prices affecting Turkey most acutely.

Global Macro News

The MNB voted to cut 25bp to 5.75%, continuing its gradual easing while maintaining credibility on inflation targeting. CNB remains the most ECB-responsive among the group, with its next moves likely to track the 2.25% deposit rate closely. NBP is expected to stay higher for longer after June’s industrial production beat, pricing only one further 25bp cut by year-end.

BNR keeps policy on hold amid Romania’s widening trade gap and slower convergence progress. CBRT faces unique political constraints and is anticipated to hold the 37% rate tomorrow while tightening liquidity via reserve requirements. Policy divergence is clearest between Turkey’s high-rate regime and the gradual cuts seen in Hungary and the Czech Republic.

Euro-adoption criteria continue to bind Poland, Czechia, Hungary and Romania more tightly to ECB outcomes than Ankara’s independent framework.

Emerging Europe Central Banks Watch

Poland’s economy shows readiness for renewed expansion according to Colliers, supported by EU fund inflows and manufacturing resilience. Energy import dependence remains a shared vulnerability across the region, with Brent’s 1.31% gain adding to import costs for all five economies. Hungary’s forint stability post-cut suggests markets view the easing cycle as measured and data-dependent.

Romania continues to run a wide trade deficit that keeps BNR on hold despite euro-area convergence progress. Czech retail sales momentum remains consistent with gradual CNB easing aligned to ECB moves. The ECB deposit rate stands at 2.25% while Eurozone CPI printed 2.80% y/y and unemployment held at 6.20%.

These levels anchor expectations for CNB and MNB policy convergence toward the euro-area path.

Emerging Europe Macro Daily(Beta Mode)