Key events in EMEA next week

The wind of change is about to arrive with the next Hungarian central bank meeting as the central bank has made it clear that it will say goodbye to an era in June.

It seems there are two possible options on the table. A quarterly-based tightening cycle starting with a bang or a month-by-month cycle with smaller steps. We think the central bank will choose the softer but continuous cycle, so the month-by-month scenario. In this case, the first step will be a 30bp hike to the base rate and a 15bp hike to the 1-week deposit rate.

Alongside rate hikes, we see the central bank preparing markets for changes in its lending program (FGS, BGS), where we expect much smaller-scaled green initiatives. When it comes to QE, we think that the NBH will remain comfortable running this program, following in the ECB’s footsteps. All of these will be triggered by the foreseen changes in the economic outlook.

We see the NBH revising its growth and CPI forecasts upwards in its June Inflation Report.

We will get the May industrial production data on Monday in Poland, and we expect an increase of 27%YoY - slightly below the market consensus.

Despite the gradual opening of the economy, the industry is experiencing supply chain disruptions. Nevertheless, the containment of the latest wave of the pandemic should support retail sales. We expect the CSO to confirm a strong rebound offsetting the sharp drop seen in April. However, sales in MoM terms also fell in March, so the YoY outcome in May may be slightly worse than expected by the market.

The unemployment rate in Poland reached 6.5% at its peak in February 2021 (up by ~1pp from the pre-pandemic level) and is gradually falling since the economic recovery is gathering pace. We estimate that in May, it has reached 6.1% on its way to the bottom of around 5.7% in September.