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Morning Summary:  Inflationary Pressures Are Intensifying

POLAND
  • The 7D SMA of daily new Covid have started to decease again (back below 4,000) after ticking slightly higher to 4,300 in the past few days (down from a high of 28,900 on April 1st). Poland PM Morawiecki said that the country will reopen cinemas and theatres on May 21, eight days earlier than originally planned.
  • In the past few weeks, we have seen that some NBP policymakers have started to express their concern over inflation risks in Poland, expecting CPI inflation to average over 4% in 2021 (much higher than the NBP and sell-side forecasts). Earlier this week, NBP policymaker Jerzy Kropiwnicki mentioned that he sees inflation 'above 4% at year-end', with price growth driven by factors outside monetary policy realm.
  • Yesterday, we heard PMC member Eugeniusz Gatnar mention in an interview that NBP should hike by 10 to 15bps at next meeting on June 9 to curb inflationary pressures. According to him, the MPC can 'no longer afford to watch growing prices passively'; Gatnar expects CPI inflation to reach 5% in June, driven by a variety of factors such as the acceleration in the vaccination campaign, huge fiscal support, PLN weakness, higher services prices (companies compensate for lockdowns).
  • Hence, growing concerns over rising inflationary pressures could increase disagreements over the trajectory of rates in the coming months, and has also been weighing on Polish bonds in the past few weeks.
  • Next data to watch is the Final CPI print and Q1 GDP (expected to fall by 1.4% YoY), both coming today at 9am (London time).
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