CEE Macroeconomic and Fixed Income Research

Analysts’ View:

TR Rates: The CBT will announce its rate decision at 13:00 CET and no change is expected. Despite the TRY’s recent rally, the FX basket of half EUR and half USD is still 1.5% weaker than the April MPC meeting. Also, the longend of the yield curve is still high enough to prevent the CBT from easing according to the CBT’s ‘flat yield curve’ guidance. More importantly, the inflation outlook is not bright with the weaker currency potentially threatening the core inflation on top of the already problematic food segment. A cautious tone in today’s statement would be market positive by reconfirming the CBT’s focus on inflation and not on short-term developments in the financial markets. We continue to believe that the CBT might have the possibility to ease by 50bps after the June elections.

PL Macro: Nominal wage grew 3.7% y/y in April that is marginally above our forecast of 3.6% y/y and slight disappointment for the market as consensus pointed to 4.0% growth dynamics. Employment went up 1.1% y/y in April as expected. Overall, labor market conditions have been improving and, today, we expect to see continuation of positive trends in real economy in industrial output and retail sales growth. In our view, industry expanded by 4.4% y/y in April. Such a figure marks slight deceleration of growth dynamics in comparison to previous month (PMI has dropped to 54). Nominal retail sales is expected to go up by 0.9% y/y in April, however we see the risks for better readings as inflation rate surprised to the upside. All in all, positive development in real economy support our expectations of further strengthening of the zloty toward 4.02 at the end of 2Q15.

SK Fiscal: The Slovak government sold its 49% stake in the telecommunications company Slovak Telekom to the majority holder Deutsche Telekom. The sale was initially planned to go through the stock exchange in Bratislava and London until the government received a more advantageous offer from Deutsche Telekom. The sale should bring in EUR 900 mil. to the state. The government has not clearly stated what it plans to use the money on. Possible options include lowering the sovereign debt of the country or purchasing some other financial assets.