The Czech National Bank (CNB) holds a rate-setting meeting today, 5 November 2026, and Erste Bank Research expects a further tightening of monetary policy. Czechia is the only country in the Central and Eastern European (CEE) region clearly tightening monetary conditions. The CNB raised its key interest rate by 25 basis points to 3.75% in June, and a further increase to 4.0% is expected at today's meeting.
According to Erste, the expected move reflects persistent core and services inflation, solid wage growth, and renewed upside risks from energy and commodity prices. Elsewhere in the region, central banks have either kept rates stable, as in Poland, Romania and Serbia, or eased monetary policy, as in Hungary, since the outbreak of the war in Iran, according to Erste Bank Research. Poland's Monetary Policy Council kept the reference rate unchanged at 3.75%.
The recent moderation in headline inflation, supported by government subsidies, is being weighed against continued uncertainty over fiscal policy, wages and external price pressures. Elevated commodity prices are the key factor behind the update to the growth and inflation projection. The inflation path for 2027 is noticeably higher than in the July projection and rises above the National Bank of Poland (NBP) target range, returning to the target band only in 2028.
The midpoints of the probability ranges for CPI inflation are 3.15% for 2026, 4.20% for 2027 (versus 2.75% previously) and 2.90% for 2028. The GDP path is very similar to the one presented in the July projection. Erste Bank Research states that its most likely scenario is for NBP interest rates to remain unchanged through the end of 2026 and throughout 2027.
In market developments, Democrats won both chambers in the November 3 US midterm elections, taking at least 54 Senate seats and ending unified Republican control. Voter anger over Trump's policies, particularly the role of the US-Iran war in pushing up the cost of living, helped the Democrats win the elections. Oil prices fell on expectations that the result could reduce the risk of a further escalation of the US-Israeli war against Iran, and Brent crude is now trading below USD 100 per barrel.
The outcome also boosted CEE currencies, with EURCZK, EURHUF and EURPLN all declining on Wednesday and EURPLN returning below 4.40. Long-term yields fell across most of the region, with Romania the exception. Finally, headline inflation in the euro area rose to a three-year high of 4.0% y/y from 3.8%, reinforcing expectations of another European Central Bank (ECB) interest rate hike this year, according to the Erste Bank Research Team.
Source: Erste Bank Research Team, CEE Macro Daily, 5 November 2026, via FXStreet.
Source: fxstreet.com