NBH set to cut the rates further

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Polish zloty weakens on Duda´s victory

NBH set to cut the rates further

The Polish zloty has weakened after the presidential elections, but trimmed part of the losses later during the day on Monday. The victory of the opposition candidate Andrzej Duda will not bring about any revolution at the moment. Although his populist pre-election promises (such as a lower retirement age threshold) might severely affect the state coffers, as president he lacks adequate tools to enforce such promises.

What is more concerning, is growing popularity of the pupulist-conservative opposition ahead of the parliamentary elections. A victory by PiS in the autumn elections to the Sejm would have much greater consequences. In the run-up to the presidential election Andrzej Duda let us glimpse what would probably happen in Poland under the rule of PiS. In terms of the economic policy this would probably include much lower budgetary discipline – the plans for higher tax reliefs, lower retirement age and greater support for families with children might increase Poland’s public debt by more than 10% of GDP according to gross estimates. Furthermore Poland would probably follow the example of Hungary in its attitude towards the EU, primarily stressing the national state and national interests and being much less cooperative. Putting it all together markes might be pretty nervous ahead of the Sejm elections.

The highlight of todays session is the NBH meeting. We believe NBH is comfortable with the current level of the forint and won’t stop NBH’s easing cycle. Although we cannot exclude that speed might slow from 15bp to 10bp, the consensus view is 15bp cut to 1.65%.