Miroslava Krufova, Anita Komuves

PRAGUE/BUDAPEST – Strong gains for the Hungarian forint and the Polish zloty against the euro in the coming year, as central European currencies continue to appreciate, aided by anticipated rate rises.

Inflation in Central Europe reaches new heights. More policy tightening will help to boost regional currencies, which had lost around 1% due to the stronger dollar.

Krystian Jaworski from Credit Agricole, a senior economist in Warsaw (OTC) stated that “Generally the zloty should support a tightening domestic monetary policy over the next 12-months.”

“Also, the growth prospects for the country should be very good once the wave of the pandemic ends.”

It was anticipated that the zloty would rise by 3.5% to 4.46 against euro from Monday’s close levels.

Polish rates hike fears were further fuelled by Friday’s inflation data. The CPI rose to 6.8% an annual rate, according to officials. Analysts have suggested that it may reach 8.

In 2021 the zloty was behind its peers. The Polish central bank, which is the first in the region, did not lift rates until October, and it has been slow to do so. The central bank is likely to tighten even more at Wednesday’s meeting.

In the coming year, the Hungarian Forint will be stable at 3%-35% per Euro. This is also helped by the rate increases that were initiated in June by the National Bank of Hungary.

The tightening cycle will have an immediate effect on the forint, even though the bank has slowed down the rate of hikes by 15 basis points. “The small steps add up,” Gergely Supan, an analyst from Takarekbank said.

The Czech crown is expected to continue its strong performance this year and will grow 2.3% in the coming 12 months. Markets are pricing in 125 basis point increases for the remainder of the year.

Romania’s political instability continues to hinder efforts to limit twin deficits. The projected leu will fall to 4.997 per euro by 1.0% next year.