Divergence into Summer: CEEMEA Macro Focus | Europe

Research evidence excerpt

Divergence into Summer: CEEMEA Macro Focus | Europe

IdeaMExhibit 2: Morgan Stanley CEEMEA central bank risk matrix

Source: Morgan Stanley Research

• South Africa: A renewed energy or food shock, rand depreciation, stronger

core inflation or a further rise in expectations would delay the 2027 easing

cycle and could require additional tightening. Lower oil prices, further rand

appreciation and broad-based downside core inflation surprises would

reinforce our view that the July hike marks the end of the tightening cycle.

• Czech Republic: Persistent services inflation, elevated wage growth and

further fiscal easing would create a case for another hike and potentially

fewer cuts in 2027. Weaker activity, faster wage moderation and core

inflation moving closer to 2%Y would support earlier easing.

• Poland: Persistent wage growth, sticky core inflation and further fiscal

expansion would lead us to remove the 2027 cuts from our baseline. Faster

wage deceleration, weaker domestic demand and credible fiscal

consolidation would bring the first cut forward.

• Egypt: Sustained EGP weakness, a higher energy import bill or weaker

external financing would extend the hold and could require renewed

tightening. Repeated downside inflation surprises, stable FX and a material

improvement in the BoP would create scope for a late-2026 cut.

• Turkey: Higher energy prices, renewed FX pressure, weaker global risk

appetite or stronger domestic demand could delay the first cut and

potentially produce tightening. Faster sequential disinflation, stable FX and a

deeper slowdown in growth would support a deeper easing cycle.

• Hungary: Forint depreciation, renewed energy-price pressure, fiscal slippage

or greater uncertainty around EU funds could trigger a pause. Continued