### POV: PLN WELL POSITIONED TO BEAT...>

POLISH ZLOTY: ### POV: PLN WELL POSITIONED TO BEAT HUF ON ANY PROTRACTED CEE

WEAKNESS

-As Eastern Europe's largest energy importer, the rallying oil price in PLN

terms could become increasingly important for the Polish central bank's

inflation profile. Oil priced in PLN has rallied over 40% in the past year,

potentially pushing CPI closer to 3% by the year's end. In turn, the resulting

inflationary pressure may force the central bank to re-assess their record low

rates.

-This contrasts with Hungary, which may come under further pressure to boost

liquidity as 10y swap rates have nearly doubled in 2018, rising to 2.5% as the

central bank initially refused to boost swap supply in February. Nonetheless,

the operation now totals HUF 1.8trillion - a new high. This willingness to

remain flexible despite rate risk concerns and a poor budget deficit (albeit

partly due to election-related spending) make it increasingly unlikely the bank

will turn off the liquidity taps, thereby keeping a lid on the HUF.

-See MNI Analysis email for full details.