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2020/07/13 / Erste Group Research

Poland Weekly Focus | Central bank in focus

Central bank to keep rates on hold and present main findings of new inflation and growth projection. June should bring further deterioration of labor market conditions, with dropping employment and slowing wage growth. Flash inflation to be confirmed.

July 14 | Target rate on hold and new growth projection. We expect the MPC to keep the target rate stable at 0.1% at this week’s rate-setting meeting. In our view, the recent increase of inflation will not be a concern for the central bank, as they focus mainly on supporting economic growth in the current circumstances. We continue to see stable rates until at least the end of 2021 as the most likely scenario. Moreover, the main findings of the new inflation and growth projection, due on July 17, will be published.

July 15 | Flash inflation to be confirmed. The flash estimate of June inflation surprised to the upside and arrived at 3.3% y/y (up from 2.9% y/y in May). We suspect that the growing prices of services could have been the main factor behind the surprise. Increasing pressure from the services sector points to a further rise in core inflation (due July 16), which will likely move towards 4.0% y/y in June.

July 17 | Labor market data for June. The situation on the labor market has been deteriorating since the outbreak of the pandemic and we think that it will continue to do so in June. Although the unemployment rate has barely increased since April, the employment dynamics turned negative. We expect employment growth to dip by -3.5% y/y in June. Wage growth should also ease further and we see it at 0.4% y/y.

Bond market drivers | 10Y yield moved toward 1.3%. Over the course of the week, downward pressure on the long end of the LCY curve continued, as the 10Y yield decreased and moved below 1.32%. The decrease of the Polish curve mirrored the development of core markets, where the 10Y German Bund went down by around 8bp toward -0.5%. The spread over the 10Y German Bund remains broadly unchanged at around 180bp. This week, the central bank will be in focus, with the MPC meeting and new inflation and growth projection.
FX market drivers | EURPLN remains depressed. The zloty did not benefit from the weaker US dollar, as the EURPLN remained in the narrow range of 4.46-4.47 during the summer trading week. The result of Sunday’s presidential election had no strong impact on the zloty. We expect the zloty to follow pandemic news and react to changes in global sentiment.

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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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