EMEA: Poland on hold, divergent inflation trends in Turkey and Russia

In Poland, NBP is expected to keep policy rate unchanged. Inflation surprised on the downside, and is very low at -0.8% y/y.  However, base effects and drought should boost it in Q4 and next year. Growth has remained steady at about 3.5%, but recent PMI weakness again casts doubt on its sustainability. Conditions would have to deteriorate considerably for the current MPC to consider rate cuts, dovish nuances from MPC would likely weigh on PLN.  

"We reiterate short PLNHUF recommendation ahead of the meeting, as we believe rising political risk, a move towards populism; worsening fiscal risks and potential policy unorthodoxy in Poland will likely lead underperformance of PLN versus HUF", says Barclays.

In Russia, favourable base effects will start to set in and move inflation slightly lower in September and even further down in Q4. Food inflation is already easing with six consecutive monthly declines. On the other hand, In Turkey, inflation is expected to accelerate in September as a result of the inflationary impetus from currency weakness. While the inflation profile looked favourable in Q3, recent depreciation in TRY and food price pressures have changed the outlook. Risks to the inflation outlook are still skewed to the upside: the volatile nature of food prices warrants caution, and the risk of further currency depreciation is non-negligible.