Weekly Focus Poland

The MPC left policy rate flat at 1.5%. Despite upward revision of inflation and growth forecast, the MPC sustained its dovish stance. This week GDP is the key domestic event and we expect growth to accelerate to 4.8% y/y. Labor market data (wage growth and employment) should confirm further tightening.

November 14: We expect GDP growth to accelerate to 4.8% y/y in 3Q17 above market consensus at 4.5% y/y. We expect to see GDP growth dynamics at 4.8% y/y, up from 3.9% in 2Q17. Overall robust performance of the industry as well as dynamic retail sales growth suggest strong growth momentum. Our forecast is above market expectations (4.5% y/y) and if proves to be correct another upward revision of this year growth is likely (from current forecast at 4.1%). November 17: Nominal wage growth and employment data to confirm further tightening. Nominal wage growth has been accelerating lately and we expect it to arrive at 6.3% y/y in October. Tight labor market conditions and labor shortages are likely to out further upward pressure on wages. Employment is expected to raise 4.5%

Long end of the curve moved down. Long-term yields have dropped over last week. Toward the end of the week the dovish tone of the MPC seems to cool down expectations for monetary tightening to begin sooner than governor Glapinski has been suggesting i.e.2019. It seems that hawkish MPC members remain in majority, yet the pressure will be gradually rising. The spread vs. Bunds have narrowed toward 300bp.

Zloty holds around 4.23 vs. EUR The zloty has been relatively stable throughout last week. There were no major impulses that could push the zloty more visibly. This week, if GDP growth surprises to the upside we may see short-lived strengthening as robust performance of the economy is mostly priced in. As far as global sentiment is concerned it seems that the expected rate hike in US in December is already in prices, limiting appreciation potential of the zloty.

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