PLN: Zloty Trades Flat, March Inflation Confirmed At +4.9% Y/Y
EUR/PLN changes hands at 4.2830, staying close to neutral levels and within the confines of yesterday's range. A restart of gains and a break above Apr 7/Dec 25 highs of 4.3057/4.3114 would support the bullish case. Bears look for a dip towards Apr 9 low of 4.2231 as a clean break here would mark the formation of a mini-double-top pattern.
- The government is looking to delay the implementation of updated retail electricity tariffs until October from July, to align it with the expiry of the existing price cap. In the government's view, this would result in a better reflection of market conditions, i.e. lower wholesale prices. This supports the consensus view that household electricity prices will not increase markedly in 4Q25 (if at all), in contrast with the NBP's hawkish assumption.
- Headline inflation was confirmed at +4.9% Y/Y, meaning that it plateaued out at this level in 1Q25. It should now decline in the coming months, with base effects supporting the process, as the NBP looks set to start lowering interest rates in the near future. Some analysts expect headline inflation to reach the +/-1pp tolerance zone around the +2.5% Y/Y target as soon as this summer.
- The WIG Index operates 1.3% higher on the session. Relevant stocks came under modest pressure as Prime Minister Donald Tusk said that "maximising profit isn't the main task of state-run utilities" as he outline a vision of more "egoistic" economic policy. He also announced that the first deregulation package prepared in collaboration with business leaders will be unveiled this Thursday.
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
