Opposition to Putin is growing

Following the Russian Duma elections in early December there have been protests against what opposition forces are seeing as Prime Minister Vladimir Putin’s monopoly on power. In a special in this week’s EMEA Weekly, we take a closer look at the demonstrations and potential financial market impact.

Data to support call for Polish rate hikes

This week the Polish central bank (NBP) announced that in line with our expectation (and market consensus) it had kept its key policy rate unchanged at 4.50%. However, at the press conference following the rate decision, the NBP’s monetary policy council (RPP) struck a relatively hawkish note and, judging from the comments from the RPP, we should certainly not rule out rate hikes.

Next week is set to bring several Polish macroeconomic releases and, in general, the data is, in our view, likely to be supportive of the NBP’s hawkish rhetoric. Most focus is likely to be on the inflation data for January. We estimate inflation eased off to 3.5% y/y in January, from 4.6% y/y in February. Even though we are looking for a fairly large decline in Polish inflation, we expect Polish inflation to remain well above the NBP’s inflation target of 2.5% well into 2013.

Despite inflation being set to inch down, we also expect a fairly strong reading for industrial production (+9.2% y/y) and robust wage growth (+6.0% y/y). One can hardly talk about an overheating Polish economy but it remains that the Polish economy is in much better shape than most economies in Europe, which justifies the NBP’s focus on the upside risks for Polish inflation.

Next week is due to bring inflation numbers not only for Poland but also for most for the other Central and Eastern European economies. We are looking for the inflation numbers in the region to come out more or less in line with expectations and as such we do not expect them to have any major market impact.