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Market Pricing In An Early Move From NBP

POLAND
  • The 7D SMA of daily new Covid cases continue fell to 2,200, down from 3,900 the week before (and from 28,900 on April 1st). Poland PM Morawiecki said that the country will reopen cinemas and theatres today (May 21) eight days earlier than originally planned.
  • According to the NBP website, three MPC members - Eugeniusz Gatnar, Lukasz Hardt and Kamil Zubelewicz - voted to increase the required reserve ratio to 3.5% on the MP meeting on April 7 (vs. 6 voted to keep its steady at 0.5%, Sura did not attend the meeting).
  • In recent weeks, we have also seen that disagreements over ST rates trajectory have been rising among NBP policymakers amid growing concerns over inflation risks.
  • While the majority of policymakers aim to keep interest rates steady until at least the end of the MPC term (in Q1 2022) to maintain financial conditions as loose as possible, a rising number of rate settlers have been in favor of an earlier hike.
  • The market has recently been pricing in an early move from NBP (a potential 10bps hike this summer), which partly explains the strong momentum on PLN against major crosses.
  • Yesterday, economic data showed that average gross wages rose slightly less than expected by 9.9% in April (vs. 10.1%), and employment growth rose by 0.9% YoY (vs. 1.1% exp.).
  • Next economic data to watch are PPI inflation and construction output coming out this morning at 9am (London time).

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