Central European monetary policy may stay ultra-loose

Significance

Financial markets in Central Europe (CE) are closely correlated with those in the core of the euro-area and their central banks are the most dovish in emerging markets (EMs), mostly because of subdued inflationary conditions. Hungary's National Bank (MNB) is likely to cut its main policy rate further, possibly as soon its next meeting on March 22, while Poland's new Monetary Policy Council (RPP) may eventually turn to unconventional easing measures to combat persistent deflation.

Impacts

• The 65% plunge in Brent crude prices since mid-2014 will provide a fillip to domestic demand in CE, an oil-importing region.
• EM equity funds -- one of the market's hardest-hit segments -- are recording their first inflows since September 2014, JP Morgan says.
• Concerns will remain about the policies of Poland's new nationalist government.