Conversion prices from FX conversion of CHF mortgages might be larger for Polish banks
February confirms that deflation persists in Poland
The Polish zloty weakened yesterday, which was not simply profit-taking, however two adverse elementary might be in play too – unfavorable information about Polish banks and deeper deflation recorded in February.
The Polish regulator KNF commented on president-proposed CHF mortgage invoice. Within the base–case state of affairs (assuming FX & rates of interest fastened at end-Dec 2015 degree) KNF sees PLN 66.9bn hit to banks in 2016, whereas within the antagonistic state of affairs (FX & rates of interest 25% above end-Dec 2015 degree) banks might take PLN 74.2 to PLN 107.2bn hit in 2016. Therefore, the assumed conversion prices are far above expectations, at present set at some PLN 30-50bn (even in case of base-case state of affairs). Therefore, it helps our damaging view on the entire Polish banking sector, nevertheless the presidential invoice is more likely to be soften at the least a bit on the finish and the banks shouldn’t have been harm an excessive amount of in our view.
Relating to the February inflation launched yesterday too, the market observed that shopper costs fell to -Zero.eight% Y/Y. As anticipated, gasoline costs have been once more the important thing driver behind very low inflation figures. On this respect it’s value noting that the Polish Statistical Workplace will launch one other set of associated knowledge right now – wages and core inflation, however we don’t anticipate any response this time. All Central European markets ought to concentrate on the FOMC assembly. We anticipate the Fed to decrease 2016 price hike projections from four to three within the dot plot whereas reinserting the “balanced dangers” phrase within the assertion. That opens the best way to a June price hike.
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