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2021/07/05 / Erste Group Research

Poland Weekly Focus | Central bank to hold steady course

MPC meeting should not bring any material change in monetary policy setup. We expect key rate to remain unchanged at 0.1%. New projection should show visibly higher inflation path this year. First policy normalization step could take place at earliest in 4Q21.

July 8 | Central bank to keep rates unchanged. At the last MPC meeting before the summer break, we do not expect any change in monetary policy setup and the key rate will most likely remain unchanged at 0.1%. Moreover, the central bank will present the main findings of the new inflation and growth projection; the full report is due on July 12. The new forecast should show a visibly higher inflation trajectory compared to the March figures, while GDP growth could remain broadly unchanged or be revised only marginally. We expect the first 15bp interest rate hike at the earliest in November 2021. However, June inflation (at 4.4% y/y), which came in below market expectations, could delay the start of policy normalization to 1Q22 or even 2Q22.

Bond market drivers | 10Y yield down on lower CPI. Following the publication of flash inflation for June, which came in below market expectations and supports the dovish stance of the central bank, the long end of the Polish curve went down by almost 20bp. Stronger than expected easing of inflation in June could thus delay the start of policy normalization in Poland. Nevertheless, the markets are pricing in a 10-15bp hike by the end of the year. Separately, the Polish MinFin announced the bond supply for 3Q21 and auction calendar for July. State development bank BGK will hold two auctions this month (July 14 and July 28). Moreover, BGK increased this year’s planned supply by PLN 6.5bn to PLN 39.7bn.

FX market drivers | EURPLN stayed on weaker side of 4.50. Over the course of the week, global concerns over the spread of the Delta variant of the coronavirus were positive for the US dollar, which strengthened and moved below 1.19 vs. the EUR. The zloty somewhat depreciated, but overall remained locked in a narrow range between 4.50-4.52 vs. the EUR.

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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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