CEE Macroeconomic and Fixed Income Research

Analysts’ Views:

RO Rates: The central bank is expected to cut the policy rate by 25 bp at its meeting today, and thus, the rate would stand at 3.00%. The low inflation rate and the stable RON speak in favor of additional monetary easing. Last week, the NBR provided RON 2.1bn to the market via a repo transaction with 7-day maturity. This was the second repo transaction in September and suggests that a cut in RON MRR is also possible today. At the last few T-bond auctions, the MinFin had to cut back the planned amounts due to poor liquidity. In addition, the upcoming presidential elections can further increase the pressure on the bond market. We continue to see 5Y yields at 4.1% at the end of this year, but expect that yields can edge lower in the first half of 2015.

PL Macro: The Central Statistical Office published a revision of national accounts according to ESA2010 yesterday. While the nominal GDP went up (the level is higher by roughly 1.5%), the revision in growth figures was overall minor. This revision does not influence our expectations of a 3% economic growth next year, but it may improve some other indicators (such as public-to- GDP ratio or general government deficit, as % of GDP). The release does not have any implications on our market forecasts. As we already disclosed yesterday in our Insights, we revised our expectations for the year-end policy rate and currently see it at 1.75%, as we expect the inflation rate to remain low (0.1% this year and 0.9% in 2015), and growth has been slowing down.