CEE & CCA week ahead: Inflation data from Poland and Czech GDP
At a Glance
The desk anticipates a notable uptick in inflation in Poland, pushing CPI above 4% YoY, which could activate market expectations for interest rate hikes. This expectation aligns with the impending release of CPI figures on Wednesday, where the cessation of the temporary VAT cut on fuels and rising crude oil prices are significant contributors to inflation. Per the full note , this shift in the inflation landscape positions Poland's economy well above the National Bank's target range, signifying potential policy adjustments in the near term. Additionally, Czech GDP data set to confirm the second-quarter figures may shed light on consumer behavior, particularly in relation to household consumption amidst supply chain concerns. Both developments will be closely monitored by traders for their implications on currency valuations.
Key Takeaways
- 01Poland's September CPI forecast indicates inflation will exceed 4% YoY, potentially triggering rate hike speculation.
- 02The end of the VAT cut on fuels and rising crude oil prices are significant inflation contributors.
- 03Czech GDP data may reveal consumer spending trends that could affect regional economic sentiment.
- 04Market focus is particularly on how these inflation figures might influence zloty valuations.
Full Analysis
What the desk is arguing
The desk suggests that heightened inflation in Poland—anticipated to exceed 4% YoY—will likely urge the National Bank of Poland to reconsider its monetary policy stance. This view is substantiated by an increase in fuel prices following the end of the fuel VAT cut in August, which has been compounded by a rise in crude oil prices.
Moreover, the expected stabilization of food prices—following previous declines in vegetable costs—will further support the argument for rate hikes in Poland, especially as consumer price pressures mount. As stated in the source, this rise pushes inflation more notably outside the central bank's target band, elevating market speculation around interest rate adjustments.
Where it sits in our coverage
Our consensus target for the Polish zloty currently sits at 1.075, with a range spanning from a low of 1.04 to a high of 1.12. Specific firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This outlook closely aligns with the cross-firm consensus, with the desk's position at the upper boundary of the established range, reflecting an increased sentiment that the Polish monetary authorities may act sooner regarding interest rates.
How other firms see it
Most firms view the situation as supportive of a potential rate hike trajectory influenced by rising inflation in Poland. However, a few firms, like bofa, contend that inflation pressures may subside, advocating a contrary perspective. Additionally, issues surrounding the Czech industrial PMI may signal concerns over overall economic stability in the region.
Poland's inflation adjustment is likely to have ripple effects on EUR/PLN dynamics, as expectations shift alongside central bank responses to these data releases.
Market Implications
Traders should closely monitor the upcoming Polish CPI release on Wednesday, as any deviation from the expected 4% YoY could shift market expectations significantly. This is particularly important ahead of any subsequent monetary policy announcements from the National Bank of Poland that could impact currency values.
From the original
Articles CEE & CCA week ahead: Inflation data from Poland and Czech GDP Published 11:30 Czech Republic Poland Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Poland and Kazakhstan will release inflation data next week, while the Czech Republic publish
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4 itemsPolish inflation beats expectations driven by fuel prices
Per the full note [source], Polish CPI inflation jumped to 3.4% y/y in August, well above the market consensus of 3.1%, with fuel costs the primary driver. However, the desk cautions that the statistical office may not have fully captured the temporary VAT cut on fuel, suggesting the actual pace may be overstated. Core inflation is estimated to have ticked up to 3.2–3.3%, while food prices fell deeper into deflation. The National Bank of Poland is likely to hold rates steady, keeping the zloty supported. With no major domestic data on the calendar, the next key test is the central bank's communication in the coming weeks.
THINK Ahead: The calm before the CPI
The desk anticipates that upcoming U.S. CPI data will reinforce market expectations of a prolonged Federal Reserve pause, driven by anticipated month-on-month declines in headline inflation due to falling gasoline prices. Per the full note [source], while softer inflation metrics in Poland reduce the likelihood of immediate rate hikes from the National Bank of Poland (NBP), the Czech economy shows signs of resilience, suggesting a stable outlook. The potential for a Fed pause aligns with lower borrowing costs, positioning traders for continued dollar weakness, especially leading into the significant CPI print on July 14.