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It seems inevitable that the CEE central banks will start cutting rates as well to offset the negative impact of a major slowdown in external demand as the region is very closely correlated with the Eurozone which is heading for a recession, economists at Rabobank report.  

Key quotes

“The scale of an economic slowdown in the CEE will depend on how long the coronavirus outbreak lasts in Europe.” 

“The prospect of a sharp fall in consumer spending and investment is a valid reason to expect policy makers to look past elevated consumer prices and seriously consider cutting interest rates in the first half of the year.”  

“Even though interest rates in the CEE region are markedly higher than in the Eurozone or the UK, the most efficient response would be a mixture of monetary policy easing and fiscal stimulus. Such measures would have to be accompanied by decisive steps to contain the coronavirus.”

 

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