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2019/11/04 / Erste Group Research

Poland Weekly Focus | Central bank to keep rates stable

Stability of rates broadly expected. Central bank to publish new growth and inflation projection. Disappointing PMI reading for October puts into question economic growth in quarters to come. 2Y yield reacted sharply to weaker PMI and inflation.

November 4 | PMI dissapoints in October. The PMI arrived at 45.6 in October, marking the strongest downturn in manufacturing since mid-2009. Although the PMI has not been the best gauge of GDP growth, October’s reading suggests a rather pessimistic outlook for the quarters to come and the scale of the slowdown could be bigger than previously anticipated.

November 6 | Central bank to stay dovish. The MPC meeting should bring no surprises, as it is broadly expected that rates will remain stable. Moreover, the basic findings of the new inflation and growth projection will be presented. We are less optimistic than the National Bank and thus expect to see a downward revision of the growth projection. The inflation path will depend on assumptions regarding next year’s energy prices development.

Bond market drivers | 2Y yield reacts to lower inflation and PMI. Last week, development on the short end of the curve was more interesting, with the 2Y yield going down by almost 10bp. Low flash inflation and the weak PMI reading for October (released today in the morning) put downward pressure on the 2Y yield, reflecting the gloomier outlook. Despite this, FRAs hold steady, pointing to stable monetary policy in the months to come.

FX market drivers | Zloty returns to downward trend. After short-lived stabilization, the EURPLN returned to its downward move as the zloty appreciated by almost 0.6% against the EUR over the course of the week. Despite lower liquidity at the end of the week (due to the public holiday), the zloty benefited from global risk-on mode and strengthened further. We see the recent strong appreciation of the zloty as a market overreaction and there is likely not much space for further strengthening.

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General information

AuthorErste Group Research
Product nameCEE Country Update
Topic in focusMacro/ Fixed income
Economy in focusPoland
Currency in focusPolish Zloty
Sector in focus-


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