POLAND: Headline Inflation Expected To Have Reached Local Maximum In March
Mar-31 07:32
Statistics Poland will publish flash March CPI figures at 09:00BST/10:00CEST and consensus is for an uptick in headline inflation to its local maximum of +5.1% Y/Y from +4.9% registered in both January and February. The previous two readings undershot forecasts and set a lower starting point for the year amid surprises in the re-weighting of the CPI basket based on the evolution in consumer spending trends, which moved closer to their pre-pandemic pattern. The relatively wide forecast range in Bloomberg's poll of analysts (+4.8% Y/Y to +5.6% Y/Y) testifies to the relatively high uncertainty around this incoming print.
- The latest CPI outturn may have been boosted by the hike in tobacco excise tax, which took effect in March. Most analysts expect inflation to ease off in the coming months, but the NBP continues to project a rebound towards the year-end, due to the controversial assumptions on the energy price outlook. While wholesale energy prices and government communications point to a more benign scenario, the central bank decided to handle uncertainty by plugging status-quo parameters into its projection instead of identifying the most probable trajectory.
- Goldman Sachs write that inflation may have increased by 0.1pp to +5.0% Y/Y. Behind the headline figure, they "forecast an increase in food inflation that should be offset by sharper deflation in the transport fuel basket." Otherwise, they reaffirm their dovish long-term view on Polish inflation, as disinflationary external factors ("muted growth in producer prices, wholesale gas prices running at a fraction of their peak, and, most importantly, the strength of the zloty") will continue to weigh on inflation.
- PKO expect an uptick in headline inflation to +5.0% Y/Y from +4.9%, due to a firmer increase in food prices amid a low comparative base from March 2024. They point to elevated uncertainty around tobacco price growth after the excise tax hike kicked in this month, although prices were gradually increasing in previous months in anticipation of this administrative measure. They remind that the data for January and February lowered the starting point of the inflation projection for this year and a similar surprise in March could support the conviction of some MPC members that price pressures are cooling. Still, this probably wouldn't be sufficient to result in the first motion to cut rates as soon as at this week's meeting.
- In Santander's view, headline inflation may have stayed unchanged at +4.9% Y/Y for the third month in a row amid a 0.2% M/M increase in prices. They base this forecast on a relatively low (by seasonal standards) food price inflation (0% M/M) and a decline in fuel prices by around 2% M/M amid heightened momentum in core prices (around +0.6% M/M). They note that the recent CPI basket re-weighting makes it more difficult to estimate annual inflation, increasing uncertainty around today's print.
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US OUTLOOK/OPINION: A Stacked Week Ahead For US Macro
Feb-28 21:45
- Next week sees a series a key risk points, starting with trade policy and Trump’s Mar 4 deadline for an additional 10% tariffs on China (for 20% total) and the imposition of the delayed 25% tariffs on Canada and Mexico. US Treasury Sec Bessent offered a potential offramp here, saying Friday afternoon the US wants to see Canada and Mexico match tariffs on China. Whilst following through with that could see temporary de-escalation in US trade tensions with Canada and Mexico, it would likely stoke greater likelihood of China retaliation and/or further fiscal support.
- It’s bookended by ISM manufacturing (Mon) and services (Wed) reports, watched to see whether sharp increases in manufacturing prices paid seen in other surveys first show up in this broader measure and whether there is sign of spillover to services.
- The main data release of the week comes on Friday though, with the nonfarm payrolls report for February.
- The January report saw a modest miss for nonfarm payrolls but it was more than offset by a robust two-month net revision along with a smaller than expected benchmark revision. Further, the unemployment rate again surprised lower at 4.0% for its lowest since May 2024 in a further step away from the 4.3% the median FOMC member forecast for 4Q25 in the December SEP.
- Early days for the Bloomberg survey see nonfarm payrolls growth at a seasonally adjusted 155k in February and for the unemployment rate to hold at that lower 4.0%.
- Note that the nature of the DOGE “deferred resignation program”, with some 77k federal employees accepting the offer, shouldn’t see any direct impact on payrolls growth (in the establishment survey) until the October report as workers will remain on the payroll in the interim. One area where the direct impact could show however is the household survey. Assuming those who accepted the offer are treated as equivalent to a furloughed worker, they’ll register as unemployed. A word of caution though, it’s a much more volatile survey, with a 90% confidence level of +-600k for employment vs +-136k for payrolls.
- Note that post-payrolls Fedspeak sees a notable addition this time, with Fed Chair Powell set to talk on the economic outlook with both text and Q&A, starting at 1230ET. Data and tariff deliberations should still set the tone, but at this juncture we wouldn’t be surprised to see a continued call for patience in rate cut expectations considering dovish repricing seen over the past week. This is a theme that could be seen from other notable Fedspeakers throughout the week, including permanent voters Williams, Waller and Kugler.
STIR: Significant Dovish Repricing In US Rates This Week
Feb-28 21:14
- The softer growth outlook has dominated signs of renewed inflationary pressures this week - see a key summary of the week's macro developments in the MNI US Macro Weekly here.
- Fed Funds futures have a next 25bp Fed cut now fully priced for June and over the week have added nearly an entire 25bp cut over 2025 with a cumulative 70bp of cuts vs the 50bp implied by the median FOMC dot in Dec.
Significant dovish adjustment over the week:
MACRO ANALYSIS: MNI US Macro Weekly: No Escaping Tariff Distortions
Feb-28 21:12
- We have published and e-mailed to subscribers the MNI US Macro Weekly offering succinct MNI analysis across the range of macro developments over the past week.
- Please find the full report here: https://media.marketnews.com/US_macro_weekly_250228_3f0cf485bb.pdf
