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Weldon's Mini-Metal Monitor: Got Zloty-Gold?



Polish CPI hit a NEW MACRO-LOW in December, posted at +0.7% yr-yr, coming on the heels of back-to-back months of overt price deflation (minus-0.2% per month each) and thus having disinflated from the previous low of just +1.0% seen in November.

Thus, talk of yet another interest rate CUT from the National Bank of Poland is on the rise, as per comments from MPC member Jan Czekaj:

"These data for sure, create more advantageous conditions for a cut in rates."

Moreover, wages rose just +1.5% yr-yr during the 4Q, PLUMMETING from + 3.5% in the 3Q.

Indeed, a 25bp rate CUT from the National Bank of Poland would take their key rate to 4.25%, and thus narrow the rate differential over the EUR to +200 basis points and would support the current push in Zloty-Gold to newer new all-time highs, as noted in the chart below.

Indeed, the divergence between the Zloty and Gold in Zloty is testament to our major-macro theme as relates to the secular spectrum stretch, amid the decline to near DEFLATION in Polish CPI, and subsequent pressure on the BNP to cut the cost of money in the face of disinflating wages.

Indeed, from wage reflation in the late nineties and rising 'real' rates of return to wage disinflation and deflating real rates of return in the mid-2000's. We ask, Got Zloty Gold ???

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