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2018/01/08 / Erste Group Research

Weekly Focus Poland

Flash CPI arrived at 2.0% y/y in December, in line with expectations for inflation rate easing at beginning of year. MPC should thus maintain recent rhetoric of stability of rates scenario at Wednesday’s press conference.

January 10: MPC to leave policy rate flat at 1.5% The MPC is likely to leave the policy rate flat at the upcoming meeting. Growth has been robust and December’s CPI number is in line with the MPC’s expectations for the inflation rate to ease at the turn of the year. Such development supports the MPC’s rhetoric that stability of rates is the most likely scenario in the coming quarters. We currently expect the inflation rate to rise above the target of 2.5% only in mid-2018. If inflation expectations also increase, the pressure for the MPC to begin monetary tightening will rise. Under these conditions, we see it likely that we will see the first rate hike in 4Q18.

Spread vs. Bunds in downward trend The long end of the curve has moved down since the beginning of the year and 10Y yields are close to 3.2%. The move is likely to be the outcome of inflation rate easing at the turn of the year that supports a stability of rates scenario as well as strong demand for Polish treasury papers in the recent auction. At the same time, the spread vs. Bunds has been narrowing reflecting risk-on mode.

Zloty remains strong The zloty strengthened visibly toward the end of the year and the trend continued at the beginning of January. The EURPLN is at its lowest level since September 2015. This week the MPC should not deliver any new insights, as macroeconomic development is in line with the MPC’s expectations. The meeting should thus be mostly neutral for the FX market. We believe that there is limited space for further strengthening of the zloty, especially as the macroeconomic outlook has not changed.

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General information

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


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