POLAND: Cabinet To Discuss 2026 Budget, MPC's Wnorowski Expects Cut Next Week
Aug-28 07:23
- The Cabinet holds an extraordinary meeting (regular meetings take place on Tuesdays) to discuss the 2026 budget at 13:00BST/14:00CEST and is expected provide some details afterwards. Most analysts expect general government deficit to exceed 6% of GDP, with the outlook complicated by President Karol Nawrocki's refusal to sign off on any tax hikes. In addition, there is growing speculation that the 2025 budget may need to be amended.
- Cabinet members cried foul as President Karol Nawrocki vetoed another couple of bills last night, one on oil and gas reserves and one on agriculture, which came after a contentious decision to block legislation on aid for Ukraine.
- This comes on the heels of a tense Cabinet Council meeting, with the President and Prime Minister trading thinly veiled insults during the opening part broadcast by the media.
- The first bill was tabled to bring domestic law into line with EU regulations; the other one would have obliged farmers to keep electronic records of crop protection chemicals.
- MPC's Henryk Wnorowski told Bloomberg that the central bank will likely reduce interest rates by 25bp next week before pressing pause on monetary easing. In his view, headline inflation may have ticked lower to +3.0% Y/Y this month from +3.1% in July, which will be an argument in favour of a 'standard cut by the minimum amount'. However, he warned that 'this can't be a kind of rate-cut highway' as 'economic data after September may no longer stoke optimism.'
- Deputy Prime Minister Krzysztof Gawkowski said that he has trust in Poland 2050 but has permanently lost trust in its leader Szymon Hołownia after he held a controversial night-time meeting with opposition leader Jarosław Kaczyński. Gawkowski reaffirmed his intention to run in the New Left's leadership election this winter.
- At 13:00BST/14:00CEST, the NBP will publish the minutes of a monetary policy meeting held in July, which resulted in a 25bp interest-rate cut.
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EURIBOR: Record Volume day in the Calendar spread Yesterday
Jul-29 07:21
- We noted some notable early flow in the Blue (Euribor) ERH9/M9 calendar spread, being sold down to 4.5 from a 5.5 record high printed last Week, and also a massive day in the ERM7/U7 spread seller at 7.5.
- While the Volume is those Calendar spreads are non existent today, the chart clearly shows a record day in the ERM7/ERU7 Yesterday.
- Also note that plenty more were done on legs, so not showing in that total outright volume.
(Chart source: Bloomberg Finance LLP/MNI).
STIR: Trendline Support In ERH6 Holds
Jul-29 07:17
Euribor futures are -0.5 to -2.0 ticks through the blues, unwinding a little of yesterday’s recovery. We wrote last week that ERH6 had bounced off trendline support drawn from the May 2024 low, and this level continues to underpin price action in the contract.
- Although the US-EU agreement struck over the weekend should reduce near-term trade policy uncertainty, a 15% near-universal tariff rate is still a net-negative to the growth outlook, and more severe than the ECB’s June macroeconomic projection baseline.
- The MNI Policy Team latest sources piece, released yesterday, suggested the ECB’s hawkish shift following its last Governing Council meeting is more limited than markets’ reaction would suggest, particularly given the weekend’s trade deal, Eurosystem national central bank sources told MNI, admitting that while there is a new mood music it has been overinterpreted…. sources told MNI there is still a strong possibility of a further 25-basis-point cut, even if most Governing Council members would now need to see a deterioration in the outlook for this to occur.
- ECB-dated OIS continue to lean in favour of one more 25bp cut this cycle, with 16bps of easing priced through December.
- Spanish GDP was stronger-than-expected at 0.7% Q/Q (vs 0.6% cons and prior). The ECB’s June consumer expectations survey is due at 0900BST.
| Meeting Date | ESTR ECB-Dated OIS (%) | Difference Vs. Current Effective ESTR Rate (bp) |
| Sep-25 | 1.885 | -3.8 |
| Oct-25 | 1.849 | -7.4 |
| Dec-25 | 1.762 | -16.1 |
| Feb-26 | 1.742 | -18.1 |
| Mar-26 | 1.710 | -21.3 |
| Apr-26 | 1.710 | -21.3 |
| Jun-26 | 1.713 | -21.0 |
| Jul-26 | 1.715 | -20.8 |
| Source: MNI/Bloomberg Finance L.P. | ||
SONIA: Large Basis Trade
Jul-29 07:02
Large Sonia Basis trade, helps explain the Volume at that Expiry.
- SFIM7 10k at 96.42.
