Most CEE economies recorded softer inflation in July, with Czechia and Poland the main exceptions. A temporary price spike linked to the war in Iran fed through via higher oil, gas and electricity costs, though the size of the shock varied with energy exposure and domestic price interventions. Poland’s inflation rose to 3.0% y/y in July from 2.5% y/y in June after the government ended measures limiting retail fuel price increases, and fuel prices jumped 13.9% m/m, while food prices fell for a third month. Elsewhere, Hungary printed 1.2% y/y inflation, Romania eased to 8.2% y/y, Slovakia slowed to 3.3% y/y and Croatia’s producer prices moderated to 4.7% y/y; Romania’s industry contracted -5.2% y/y in June, while Poland’s 2Q26 GDP grew 3.8% y/y.
Serbia’s central bank held its key policy rate at 5.75%, citing below-expected inflation while pointing to oil-price and geopolitical risks and a lower 2026 inflation view than in May. Romania’s rate outlook is framed around a move below the benchmark rate later in the year, alongside an expectation for headline inflation to approach 5.9% by year-end. Bond yields were generally lower across the region, except in Czechia and Poland where yields rose, and the Polish zloty weakened during the week.
Interest Rate Strategies and Inflation Outlook
We recommend derivative traders focus on paying fixed in Polish and Czech interest rate swaps (IRS) over the coming weeks as inflation divergences widen. Poland’s strong Q2 2026 GDP growth of 3.8% and the July inflation spike to 3.0% suggest that the central bank will keep rates elevated. Selling Polish bond futures now provides a solid hedge against rising yields, which have already moved higher this week.
In contrast, we see an attractive opportunity to receive fixed in Hungarian HUF IRS as inflation dropped to a low 1.2% y/y in July. With the National Bank of Hungary poised for further monetary easing, Hungarian 10-year yields are primed to fall from their current 6.2% level. Shorting the HUF against the EUR via short-term option strategies could also yield gains as rate differentials compress.
For Romania, where inflation eased to 8.2% y/y, we suggest entering receiver positions in 1-year and 2-year interest rate swaps. Historical data from Romania’s previous disinflation cycles shows that bond yields decline rapidly once inflation falls below the benchmark rate, which we expect to happen as headline inflation drops toward 5.9% by December. This makes positioning for late 2026 rate cuts highly lucrative before the market fully prices in the central bank’s pivot.
Energy Derivatives and Supply Risks
We also advise taking long positions in regional energy derivatives due to severe supply disruptions caused by the Danube River drought. Similar to the 2022 European energy crunch when low water levels forced nuclear reactors to curb output, the shutdown of Romania’s reactor will tighten the regional power grid. Buying Hungarian HUDEX power futures for the upcoming autumn contracts is a smart tactical move to capture impending price spikes.
