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2020/02/10 / Erste Group Research

Poland Weekly Focus | Inflation to overshoot target

CPI is to land at 4.0% y/y in January, driven by food and services prices. However, rate hike is not being considered by central bank. FY19 economic growth at 4.0% suggests that GDP growth eased in 4Q19 towards 3.0% y/y. Bond market to likely focus on inflation reading.

February 14 | Inflation to exceed upper bound of target. The January inflation reading will be the first release for Poland in 2020 and will undoubtedly be closely watched. We expect the headline figure to increase further and leave the central bank’s target range. We see the CPI at 4.0% y/y (0.5% m/m) in January, marginally below the market consensus at 4.2% y/y. We think that food and services prices will remain the key factors that keep pushing the figure up. Unless the figure lands well above market expectations, there should be no strong reaction on the bond or FX market.

February 14 | Economic growth at year-end. After disappointing FY19 GDP growth that came in at 4.0%, we revised downward our expectations for 4Q19 as well as this year’s growth. Although the real economy data in the fourth quarter (industry, retail and wage) suggest still solid GDP dynamics of about 3.5% y/y, the FY19 figure points to a stronger than expected slowdown.

Bond market drivers | Long end mirrored core market pattern. Over the course of the week, the long end of the local curve followed developments on core markets. In the first half of the week, the long end of the Polish curve went up towards 2.2%, while the 10Y German Bund increased by close to 10bp. Towards the end of the week, that trend reversed, as both German and Polish 10Y yields decreased by 5bp and 10bp, respectively.

FX market drivers | Volatile development of EURPLN. News about a possible vaccine against the new Coronavirus resulted in an outburst of optimism on the market at the beginning of the week. As a result, the zloty appreciated strongly vs. the EUR, but it pared some of its gains later that week and the EURPLN closed the week around our quarter-end forecast at 4.28.

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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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