One of the most important economic events this week will be the announcement of decisions on interest rates in Poland, but also in Great Britain. This week we can also expect a government reconstruction as well as new information regarding Poland's rating. Here is a calendar of the most important events in the coming days.
Monetary Policy Council – decision on interest rates
Thursday's MPC decision should not bring any surprises – market participants unanimously expect no changes in interest rates both in May and probably throughout 2024 as well, with a possible window for a slight reduction at the end of the year. The NBP reference rate is 5.75% from October 2023.
NBP reference rateMateusz Krymski/PAP
The last flash inflation reading for April turned out to be consistent with expectations (2.4% y/y vs. 2.0% in April) and confirmed the persistence of core inflation. In a comment on the reading, MPC member Ludwik Kotecki said that the high level of core CPI makes it impossible to ease monetary policy.
“In the following months inflation will gradually increase. In the second half of the year, due to the modification of protective measures regarding electricity prices (raising the maximum price), the CPI will again fall outside the inflation target range. A permanent return of inflation to the NBP target remains a distant prospect. In the conditions of low unemployment, high real wage dynamics, as well as expansive fiscal policy, bringing inflation to the NBP target remains a big challenge for the central bank,” Millennium economists said in a commentary on the CPI reading.
Inflation in PolandPAP/Mateusz Krymski
“Apart from core inflation and food prices, they will also make themselves felt in the second half of the year higher electricity prices, which have the potential to significantly increase the broad CPI. In addition, there are potentially significant increases in gas prices for households (however, a lot depends on the regulator, which has the space to call on PGNiG to reduce the tariff). With the accelerating economy, there will be no environment to lower interest rates,” mBank economists estimate.
Tax-free allowance, contribution holidays and changes in the government
The Sejm will deliberate from Wednesday to Friday. The agenda includes, among others: second reading act on the so-called contribution holidays for small entrepreneurs.
During the first reading, government representatives will also have to refer to the parliamentary bill authored by opposition MPs, which coincides with the electoral demands of the Civic Coalition regarding the free quota. The pending opposition project concerns: increasing the tax-free amount up to an amount equal to twelve times the minimum wage, but not less than PLN 60,000. zloty.
Domański on increasing the tax-free amount to PLN 60,000 until the end of the termTVN24
The 16th European Economic Congress will be held from Tuesday to Thursday in Katowice, traditionally with the participation of numerous government representatives, management of state offices and large and listed companies. Those who announced their participation included: Prime Minister Donald Tusk, and the heads of the following ministries: finance, climate and environment, industry, and state assets. The detailed agenda is available on the event website.
Prime Minister on Friday Donald Tusk announced the reconstruction of the government, which is related to, among others, with the candidacy in the elections to the European Parliament of some ministers and deputy ministers, including the head of MAP, B. Budka, and the head of the Ministry of Energy and Technology, K. Hetman. During the reconstruction, the number of deputy ministers will also be reduced.
Poland's credit rating
On Friday, three EU-accredited rating agencies – Fitch Ratings, S&P Global and DBRS – will take a look at Poland's credit rating. Decisions will be announced after 22.00 Polish time.
Among the largest rating agencies, Poland's creditworthiness is assessed highest by Moody's and DBRS – at the “A2” and “A” levels. Poland's rating according to Fitch and S&P is “A-“, one level lower. The outlook for all ratings is stable.
Fitch in February indicated that the escalation of political tensions in Poland increased risks to government effectiveness, which could complicate fiscal consolidation efforts, delay the receipt of EU funds and negatively impact market sentiment, especially if it undermines the stability and functioning of key institutions.
During the last review in December, S&P indicated that the stable rating outlook balances short-term risks related to reduced external demand and loose domestic fiscal policy, with still elevated inflation, moderate levels of fiscal and external debt, and prospects for improved relations between Poland and the EU.
In turn, DBRS, confirming Poland's rating in November 2023, indicated that an increase in Poland's rating would be possible, among others, in the scenario of fiscal consolidation, which would improve the parameters of the structural deficit and debt in relation to GDP, or with faster convergence of the economy to the EU average. In turn, a significant deterioration in the debt-to-GDP ratio in the medium term or a significant reduction in the availability of EU funds would be negative for the rating.
Results of large banks and enterprises
In the coming days, the WSE will focus on the results of large banks. ING BŚ will publish its quarterly report on Monday, PKO BP and Citi Handlowy on Thursday, and Millennium and mBank on Friday. The results of larger companies will also be presented by, among others: Dino (Thursday), Budimex, or Kruk (both on Wednesday).
The results of the auction for the sale of BGK bonds to the COVID-19 Fund will attract attention on Friday on the debt market. The auction can be interpreted in the context of the recently observed lower demand for regular TS (in April, for the first time in a long time, the Ministry of Finance sold fewer bonds at auction than the lower ranges of the assumed supply).
Interest rates around the world
On Tuesday, the Reserve Bank of Australia will present its latest decisions on monetary policy parameters. A day later, the Swedish Riksbank will announce them, and on Thursday the Bank of England will announce them.
In the US, the calendar of events important for financial markets is relatively empty, so investors can wait this week for Friday's reading of the University of Michigan consumer sentiment index for May, which also contains indications of short- and long-term inflation expectations.
Along the way, there will be fresh comments from representatives of the American central bank – every day of the week, except Thursday, the presidents of regional Fed branches or members of the central management board will speak publicly.
In the context of current geopolitical tensions in the Middle East, the results planned for Friday may be potentially interesting review of Israel's rating by S&P and Moody's.
Main photo source: Shutterstock