Oil price drop to affect April’s inflation

On the radar

• Gross wage growth for February in Hungary was reported at 9.3% y/y.

• On Friday and Monday, many CEE markets will be closed due to public holidays.

• The next CEE Daily will be issued on Tuesday, April 22nd.

Economic developments

Today, we look at the development of oil prices in the international markets. Since the summer of 2023, the overall trend in oil prices has been downward, albeit with significant volatility. Following the announcement of tariffs by President Trump, Brent oil prices declined from $74 to $64, representing an approximate 14% drop within a week, likely due to expectations of a slowing global economy. Subsequently, prices stabilized and experienced a slight increase, although they remain well below pre-tariff levels. The implications for inflation, not only in the CEE region, are evident. Gasoline and diesel prices are expected to follow this trend, albeit to a lesser extent. Nevertheless, there may be unexpected downward surprises in April's inflation figures, especially if forecasts were made prior to the unraveling of tariffs. As the situation stabilizes and trading barriers are potentially removed or reduced, oil prices should return to their initial levels.

Market developments

Today, the ECB will announce its decision on interest rates. In line with market expectations, we anticipate the ECB will cut interest rates by 25 basis points. We believe that the rapid decline in service sector inflation in recent months and mounting downside risks to the growth and inflation outlook stemming from the tariff conflict will support this decision. Markets will closely listen to the press conference with President Lagarde for any hints on potential future cuts. We expect the next move to occur in June, when updated staff projections from the ECB's economists on growth and inflation, which consider the effects of the tariff conflict and the German fiscal package, will be available. CEE currencies benefited from weakening of the U.S. dollar (4.1% w/w vs. euro), the Czech koruna has returned below 25 EURCZK level.

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