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2021/11/15 / Erste Group Research

Poland Weekly Focus | Core inflation to move further up

Flash CPI confirmed at 6.8% y/y in October. We expect core inflation to accelerate to 4.5-4.6% y/y, highest since November 2001. National Bank of Poland to hold QE tender, volume of purchases likely to be negligible. Zloty remains under weakening pressure.

November 16 | Core inflation to increase further in October. The flash estimate of October CPI has been confirmed at 6.8% y/y (1.1% m/m). Food prices went up by 5.0% y/y, housing costs increased by 9.0% y/y, while transportation costs were higher by 22.1% y/y. Moreover, inflation of goods caught up with that of services as both arrived at 6.8% y/y suggesting economy-wide price pressures. Based on detailed inflation data for October, we expect core inflation to accelerate to 4.5-4.6% y/y. Until year-end, we expect the headline figure to continue rising and to land close to 8.0% y/y in December. Therefore, we expect the National Bank of Poland to continue tightening monetary conditions and to deliver a 50bp hike in December and January followed by two 25bp increases in February and March. Nevertheless, the interest rate outlook remains highly uncertain and will strongly depend on short-term inflation developments.

November 19 | Mixed labor market statistics for October. We are somewhat less optimistic than the market and expect wage growth to ease and land at 7.4% y/y in October (consensus at 8.9% y/y). Solid wage growth data will likely be accompanied by weakening employment growth, which we see at just 0.4% y/y in October. Thus, employment remains around 100tsd lower compared to pre-crisis levels. According to preliminary data from the Ministry of Family and Social Policy, the unemployment rate decreased by 0.1pp to 5.5% in October.

Bond market drivers | Local currency curve inverted. Over the course of the week, the long end of the curve was broadly unchanged and remained anchored at 2.9%. On the other hand, rising market expectations for another bold step by the National Bank of Poland at the December MPC meeting pushed the 2Y yield up by another 40bp to 3.05%. As a result, the LCY curve became inverted for the first time since the end of 2008. According to Governor Glapinski, it is currently more probable that interest rates will continue to go up than that the NBP will remain on hold. However, the assessment could change based on incoming data.

FX market drivers | Zloty extended its losses. The zloty remains under the negative impact of global factors and uncertain monetary policy outlook, as it extended its losses and moved to 4.64 vs. the EUR. Despite solid fundamentals – 3Q21 GDP growth arrived above expectations, and ongoing monetary tightening – the zloty continues to underperform. his week in the CEE region, all eyes will be on the Hungarian central bank. We expect the MNB to raise the key rate by 30bp to 2.1%. Should market expectations be disappointed, the forint will depreciate sharply and could affect other CEE currencies.

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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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