PLN: Zloty Clings Onto Familiar Levels Ahead Of This Week's NBP Meeting
EUR/PLN trades at 4.2524, almost flat/with marginal bearish bias. A breach of May 15 low of 4.2230 would signal the emergence of intensifying downside impetus, while bulls look to reclaim Apr 16/Dec 25 highs of 4.3102/4.3114.
- The NBP will deliver its next monetary policy decision on Wednesday ahead of the Governor's press conference the following day. Analysts are divided as to the outcome, with most expecting the reference rate to be kept at 4.75%. However, there seems to be a consensus that the extension of household electricity price freeze and below-forecast September CPI data have increased the odds of a cut already this month. Furthermore, most analysts seem to think that if the MPC does not cut rates this week, it will take action at the November meeting when it is due to receive a fresh macroeconomic projection.
- Over the weekend, Finance Minister Domański complained that 'interest rates in Poland remain very high, among the highest in the entire European Union. And this is the direct reason why loans in Poland are expensive (...) I am not assessing the policy pursued by the Monetary Policy Council (...) but these are the facts, these are the figures.'
- Czech PM candidate Andrej Babiš reaffirmed his commitment to helping Poland if it falls prey to aggression and pledged to make efforts to boost relations with Warsaw. Babiš drew criticism in the 2023 presidential campaign, when he appeared to be watering down Czechia's collective defence obligations.
- POLGB yields sit marginally higher across the curve. The WIG Index has added 0.2%; WIG20 is 0.1%.
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LOOK AHEAD: US Macro: PPI (Wed) and CPI (Thu) Inflation
US PPI inflation is released on Wednesday before CPI inflation on Thursday, an unusual ordering that should see core PCE implications dialled in after the CPI release rather than the usual wide range waiting for specific PPI details. PPI will be watched more closely than usual this month after a far stronger than expected jump in last month’s July report fired a warning short over tariff-based cost pressures starting to feed through. That included a 0.6% M/M increase in our preferred core series of PPI ex food, energy & trade services, which strips out items such as the then booming portfolio management & investment advice category following the strength in equity markets. It's too early to gauge an accurate sense of analyst expectations for August.
CPI inflation on Thursday will then be the last major release ahead of the Sep 17 FOMC decision. Consensus looks for core CPI at 0.3% M/M after the 0.32% M/M in July, another monthly increase comfortably above a pace consistent with 2% inflation. August should in theory start to see the largest tariff impacts along with September and possibly October. Returning to July’s report, core goods inflation was softer than expected, at a still solid (by core goods standards) 0.2% M/M for a second month running but about half that of 0.4% expected by analysts. Instead, non-housing core services surprised higher. The latter was a “dangerous” development in the words of a usually dovish Chicago Fed’s Goolsbee (’25 voter), who speaking after Friday’s payrolls report is still undecided on a September cut whilst looking for August inflation data “to get more information”.
LOOK AHEAD: US Macro: Payrolls Preliminary Benchmark Revisions (Tue)
- The BLS on Tuesday will publish preliminary estimates of benchmark revisions, based off QCEW data for Q1.
- These will give an indication of the actual benchmark revisions on the Mar 2025 level of payrolls due with the Jan 2026 payrolls report released in early February.
- Bear in mind that the final benchmark estimate tends to nearly always be more negative than the preliminary figure – see historical values to the right.
- That doesn’t mean they can’t be large again after last year’s historically negative revision that lowered the level of payrolls by ~600k. Initial estimates we’ve seen look for another large downward revision, with the smallest being worth -550k but with wide ranges higher.
FED: Barclays Adds A Cut To 2025 Fed View
Barclays analysts now expect three Fed cuts in the remainder of the year, adding October to their pre-existing call for 25bp reductions in September and December. "Given the disappointing August employment report, we expect the FOMC to see more elevated downside risks to the employment side of the mandate."
- As for a 50bp September cut, "we think that the FOMC will view [that] as sending too strong a signal that labor market conditions are deteriorating. Indeed, we think that participants such as Powell understand that the slower pace of payroll employment reflects at least, in part, slower labor supply, which does not translate into increased labor market slack."
- For 2026 they continue to expect 25bp cuts in March and June to 3.00-3.25%, but "we do not think the FOMC will be able to cut rates more than twice next year, as we think that activity will show some slight acceleration, with the economy adapting to the new tariff environment and fiscal policy providing some support, and the unemployment rate will revert down amid limited increase in labor supply."
