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POLAND
  • Lower house of Polish parliament passed an overhaul of the tax-system, a key part of the government's larger plan to help the European Union's largest eastern economy emerge from the Covid crisis. The bill was voted on Friday and sent to the Senate for approval (BBG).
  • Last week, economic data showed that inflationary pressures continue to increase in Poland with September CPI inflation coming in higher than expected at 5.8% (vs. 5.5% exp.), up from 5.5% the previous month.
  • It seems most likely that the NBP is going to raise rates earlier than expected; market is pricing in a first move at the November meeting as inflation forecasts are going to be reviewed to the upside.
  • At this stage, there are three policymakers (Hardt, Gatnar and Zubelewicz) voting for an 'imminent' rate hike as they mentioned several times that inflation is now demand-driven in Poland and a gradual tightening could ease the inflationary pressures.
  • The NBP is expected to leave its policy rate steady at 0.1% on Wednesday, but then could start a tightening cycle in its November meeting with a first 15bps hike.
  • With the FRA 3Mx6M currently trading at 42bps above the Wibor 3M, the market is currently pricing in two to three 15bps by January.

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