EM CEEMEA CREDIT: POLAND: Rate decision – Policy statement

The ISM Manufacturing headline PMI reading unexpectedly fell to 48.5 in May (49.5 survey, 48.7 prior), leaving it in contractionary territory for a 4th month. As the survey put it, "contraction in most of the indexes that measure demand and output have slowed, while inputs have started to weaken". Tariffs cast a heavy shadow over this stagflationary report report, impacting everything from exports to prices paid.

• New Orders ticked 0.4 points higher to 47.6, with the closely-watched (in a nonfarm payrolls survey week) Employment reading up for a 2nd consecutive month by 0.3 points to 46.8. Production rose 1.4 points to 45.4. As such there was some stability evident in the May subcategories - though these should be seen in the context of very weak recent figures (New Orders has now declined 4 consecutive months after 3 months of expansion; Production: 3 consecutive contractions after 2 months of expansion.)  
• Supplier Deliveries continued to slow - considered a "positive" per the ISM survey - with the index rising 0.9 points to 56.1. Backlogs picked up 3.4 points to 47.1 but still contractionary. And on employment, the report notes "remained in contraction, as head-count reductions continued. Companies generally opted for layoffs because they are quicker to implement than attrition".
• The big drags came from trade. New Export Orders fell 3 points to 40.1 (outside of Covid, the lowest since March 2009) - and the report notes that Imports "plunged into extreme contraction", down 7.2 points to 39.9 (a 16-year low). Inventories fell 4.1 points from 50.8 prior.
• The report notes re inventories that "the pull forward of materials by companies to minimize the financial impacts of tariffs is largely completed", with Customers' inventories perhaps now a bit on the low side (44.5, down 1.7 points), potentially pointing to overall stability at weak levels.
• Prices paid were basically in line with expectations, dipping to 69.4 (69.3 survey, 69.8 prior) though still  around the highest since June 2022, "driven by increases in steel and aluminum prices impacting the entire value chain, as well as the general 10-percent tariff applied to many imported goods".

Ukrainian and Russian negotiators have agreed to swap prisoners and hold additional talks, but failed to make a significant breakthrough towards a ceasefire, following a second round of talks in Istanbul, Turkey. The talks lasted just over one hour, suggesting little discussion beyond the delivery of Russia’s ceasefire terms. 

• Ukrainian Defence Minister, and lead negotiator, Rustem Umerov, said Russia “continued to reject idea of unconditional ceasefire”, adding that “key issues at talks can only be resolved at level of leaders,” per Reuters.
• Umerov noted that Kyiv have received Russia’s terms for a ceasefire but said Ukraine cannot react immediately as they had only just received the memorandum.
• Umerov said, “Ukraine will be ready to decide on way forward once it has studied the Russian memorandum,” and said his delegation proposed another round of talks for the end of June.
• Lead Russian negotiator, Vladimir Medinsky, confirmed the delivery of Russia’s “steps to make full ceasefire” and noted progress on the exchange of prisoners and wounded soldiers.
• Reuters notes that Medinsky says Russia “suggested ceasefire for two-three days in certain area”, with expanding on where or when it could take place.
• Ukrainian President Volodymyr Zelenskyy said at a press conference alongside NATO Secretary General Mark Rutte in Vilnius a short time ago that the Ukrainian drone attack “seriously weakened [Russia’s] military,” and cited the mission as evidence that Ukraine’s drone industry can help with the future defence of Europe.
• As there has been no major breakthrough, attention now turns to US President Donald Trump, who is under increasing pressure to approve a punitive new package of sanctions that has broad bipartisan support in Congress. 

• The final mfg PMI for May has seen Fed Funds implied rates only modestly trim the hawkish shift higher seen overnight and early in the US session ahead of the release.
• A miss for the headline index (48.5 vs cons 49.5 after 48.7 in April) is caveated by a second prices paid reading close to 70, although weak construction spending data released simultaneously adds to the dovish takeaway.
• Cumulative cuts from 4.33% effective: 1bp Jun, 6.5bp Jul, 21.5bp Sep, 35.5bp Oct and 52.5bp.
• The Dec’25 rate is 1.5bp lower post-release.
• The SOFR implied yield of 3.24% is ~2.5bp lower post-release for back unchanged on the day. It returns to more firmly pushing what had been a range of 100bp +/-5bp range seen over much of the past three weeks.
• Dallas Fed's Logan ('26 voter) has reiterated a stance that reflects both her view and a clear consensus across the FOMC, with monetary policy seen to be well positioned, allowing patience.