Is the perfect inflation storm returning to the cee region

Key arguments

• The US-Iran conflict now resembles 2022's perfect storm, with energy, food and record shipping costs all rising.
• Core inflation remains stable because pass-through of energy and food costs takes time and weak food prices have masked the shock.
• Fading base effects and January consumer price resets are likely to expose broader inflation pressures across CEE.
• Central banks are expected to tighten faster than in 2022, while fiscal support and household savings sustain consumption.

Corresponding source evidence

1. Weak food prices have delayed inflation, but fading base effects and January resets may expose broader pressures, prompting faster central bank tightening and renewed fiscal intervention if inflation surprises to the upside Pass-through takes time When the US-Iran conflict began in March, we argued that conditions differed from 2022 and that a comparable inflation surge was unlikely. · 2022
2. Core inflation remained stable, suggesting that significant second-round effects have yet to emerge in consumer prices, a pattern also seen elsewhere in Europe.
3. It’s now classified as “very strong”, with a 75% probability that the October-December episode will be the most intense since 1950.