Key events in EMEA next week

The Bank of Russia’s monetary policy announcement will be the key focus of the week. The string of higher than expected CPI and economic activity data leaves little room for guesswork in terms of a coming rate hike, and we believe the most likely outcome is a 75-100bp hike to 6.25-6.50%, at the upper border of the previously guided 25-100 bp range. We also continue to believe that the hike will not be the last in the cycle, with the medium terminal rate likely to find itself in the 6.75-7.00% range. Near-term hawkishness should be supported by supply-side constraints in the labour market and continued cost inflation at the producer level as well as elevated credit demand in the economy. On the other hand, some easing in food prices, the reopening of outward tourism to popular destinations, and uncertainty regarding economic growth beyond the post-Covid recovery may gain importance in the medium term. The Bank of Russia’s commentary may add some colour to its list of priorities.

The coming week in Poland will start with figures from the corporate sector. We estimate that in June, as in May, firms increased employment on a monthly basis, as the economy reopened. As a result, annual employment growth should stabilise at 2.7% despite a less favourable reference base than in May. In our view, wage growth in June slowed to 8.0% year-on-year from 10.1% in May. The market consensus estimates that employment grew by 2.7% and wages by 9.5%. As for industrial production, the low base from last year is slowly fading. Therefore, we expect some deterioration in industrial production growth to 20.0% YoY from 29.8% in May (the consensus is at +19.0%). Our slightly higher forecast compared to the consensus is supported by the record-high PMI reading. Retail sales should continue to benefit from the reopening effect. It's hard to imagine that the seasonally adjusted month-on-month sales growth will remain as high as in May. However, in our view, it should be strong enough to generate 11% YoY growth after 13.9% growth in May (the consensus is at + 8.4%).