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Central European Weekly

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Polish markets in wait and see mode ahead of heavy data week

Mon, Jun 15 2009, 10:57 GMT
by KBC Market Research Desk

KBC Bank


Czech Republic

Comments from the CNB signal that the bank might stay on hold in June


Hungary

May inflation disappointed on the upside


Poland

Polish markets in wait and see mode ahead of heavy data week


The week ahead

Polish macro eye-catchers in spotlight


Overview

Central bank meetings will be very exciting in June

It seems that the June meetings of the National Bank of Hungary and the Czech National Bank will be very exciting and interesting.

Hungary is slowly but surely heading for the situation we already know from the past very well. The decreasing risk-aversion in global markets makes investors buy highyielding bonds and this supports the forint. The strengthening forint boosts rate cut expectations and this further encourages foreign investors to continue to buy bonds. All of this is happening in spite of Hungary’s inflation going up. Thus the MNB is confronted with the dilemma as to whether to rely on the favourable global sentiment, which is currently encouraging the domestic currency and reducing imported inflation, or whether, by contrast, to take into account the rise in headline inflation, which will go up even more due to a VAT increase. Our opinion is that the NBH will resolve this delicate situation by not changing its base interest rate, even if the forint strengthens slightly more.

Another exciting meeting may be that of the Czech National Bank. While the Czech economy is developing in accordance with CNB’s expectations (with both the economy and inflation going down), the latest statements suggest that CNB Board Members’ opinions are divided on whether to change official interest rates again or not. After last meeting, it seemed that the CNB Bank Board would proceed to another rate cut soon. However, the latest statements from CNB Board Members indicate, in our opinion, that they are primarily trying to find arguments for not cutting repo rates again. Therefore we are of the opinion that Czech rates will probably remain unchanged this time.

Published on  Mon, Jun 15 2009, 11:06 GMT


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Legal disclaimer and risk disclosure

This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.

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