EME Macro/Strategy: macro all-in-one (27 January-2 February)

Last week, global headlines focused on the escalating tariffs of the Trump administration, which are targeting trading partners currently. Plausible Trump tariff disruptions for the EU market in the coming months or quarters are a downside risk, which is the main reason we have not upgraded the outlook and our forecasts remain below the consensus. The Fed held rates steady at 4.25-4.50%, with Powell emphasising a cautious stance, amid policy uncertainties. The quantitative tightening could be concluded by the mid-year, but fiscal policy risks limit the scope for easing, with one cut expected in the next 12-18 months, at most. The ECB cut the deposit rate to 2.75% and signalled further easing, with another cut likely in March, in our view. We see the terminal rate at 1.75% by the year-end. The Hungarian and Georgian Central Banks kept rates unchanged, with Hungary signalling a more prolonged hold, while we forecast both economies to implement some easing later this year. The CE3 GDP data showed mixed trends: Czech growth picked up slightly; Hungary exited recession; and Poland saw an improvement, to 2.9%, in 2024. The EU Commission's sentiment index improved in January, led by industry and services, although the forward-looking indicators remain weak, signalling uneven growth ahead across the region.