Poland's monetary policy likely to be changed

Polish Parliament is likely to meet within 30 days for its constitutive session (November 24 at the latest). At the session, the current government hands in its formal resignation. The president then orders the leading candidate to form a government. The new government must be sworn in within 14 days (December 8 at the latest). The new prime minister must then present her programme for government within a further 14 days and it must win a confidence vote in the Sejm.

"The PiS will appoint 6 out of 10 MPC members. It is very likely that all new members will be quite dovish. We may expect that it will impact investors interest rate cut expectations. We think that market may start more visible rate cuts on March and April next year. Also, a new MPC may start to consider funding a programme to provide loans for SMEs", argues Societe Generale.

The main fears are related to potential new government decisions that could impact the FX market (to a greater extent) and bond yields. In case of the higher volatility and deeper weakening of the PLN, Ministry of Finance or NBP may intervene on the FX market. That is why a limited wekeaning PLN is expected after the election, at least until the formation of a new government, says Societe Generale.