Poland probably remained in deflation in October

While the forint further strengthened on Wednesday after the Hungarian government had announced earlier this week that the conversion of FX denominated loans granted to households would be made at market rates, the zloty and the koruna remained steady. Regarding the koruna, recent remarks of CNB Governor Singer and Vice-Governor Hampl uttered a year after establishment of a floor for the currency´s exchange rate vs. the euro, brought nothing new and just confirmed central bank board´s satisfaction with the current monetary policy setting. Both bankers reiterated that the central bank expected to exit the FX intervention regime in 2016.

Today, Polish inflation figures for October will be the main eye-catcher. As in the Hungarian case, we expect that the year-on-year inflation remained below zero, close to -0.3 % y/y according to our forecasts. Just as in previous months, the outcome will have been determined by external factors, namely falling food and fuel prices. Low inflation is good news for Polish households for nominal wage growth remains decent and real disposable household income is consequently rising. Although some members of the Polish Monetary Policy Council would probably like the NBP to deliver additional rate cuts given expected low inflation and slower growth, the last MPC meeting showed that the majority of voters were reluctant to do so. Still, the issue of additional rate cuts may return on the agenda during the first quarter of the next year.