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2021/04/13 / Erste Group Research

Poland Weekly Focus | What was behind inflation surge in March?

Final inflation reading to confirm flash estimate, which surprised to upside and jumped to 3.2% y/y in March. Core inflation likely returned to 3.9% y/y in March. Central bank will hold first QE operation this month. Zloty to continue benefiting from improved global mood.

April 15 | Final inflation for March. The flash CPI estimate surprised to the upside, arriving at 3.2% y/y (1.0% m/m) in March, well above our and market expectations, shifting this year’s inflation path up further. According to the available data, food price growth eased to 0.5% y/y, energy prices went up by 4.2% y/y, while prices of fuel for personal transport increased by 7.2% y/y. We expect the flash reading to be confirmed. On Friday, the National Bank of Poland will release core inflation for March; we see it returning to 3.9% y/y.

Bond market drivers | 10Y yield moves around 1.55%. Over the course of the week, the long end of the LCY curve was broadly unchanged and the 10Y yield moved close to 1.55%. This week, on Wednesday, the NBP is scheduled to buy bonds. There are two QE operations planned for this month; the second should take place on April 29 and will be held if required. According to Governor Glapinski, the NBP will remain more active on the bond market. Furthermore, on Thursday, BGK will sell bonds and will offer papers maturing in 2027, 2033 and 2040.

FX market drivers | Risk-on mood supported zloty. The improved global sentiment and weaker US dollar have been positive for the zloty, which has appreciated since the beginning of 2Q21. After hitting a new 12-year low at 4.66 vs. the EUR, the EURPLN moved toward 4.53. Separately, the recent visible weakening of the zloty softened the NBP’s wording regarding the impact of the exchange rate on growth. Moreover, the Supreme Court ruling on CHF mortgages has been postponed again until May 11. The upcoming decision of the European Court of Justice on FX loans at the end of April could provide legal guidance to local courts. We think that the zloty will weaken in the coming weeks and will return above 4.60 vs. the EUR, given the unresolved issue of FX mortgages and the central bank’s commitment to a dovish monetary policy, despite rising inflation.

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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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