Two of Wall Street’s biggest investment banks are diverging on their outlooks for Poland’s zloty after a surprise interest-rate cut sparked the worst week of selling since Russia’s invasion of neighboring Ukraine.
Goldman Sachs Group Inc reduced its targets for the currency, saying the central bank’s cut last week will likely lead to a zloty-negative “prolonged inflation overshoot.” JPMorgan Chase & Co., on the other hand, said it wouldn’t make bearish bets given Poland’s sound economic fundamentals, and would look for opportunities to go long.
Wednesday’s 75 basis-point rate cut, three times larger than expected, sparked the selloff as it raised questions about the central bank’s determination to curb inflation. Some analysts also saw it as a politically motivated maneuver coming just before a tightly contested general election on Oct. 15, with the main opposition party saying it’ll convene a special tribunal to try Governor Adam Glapinski if it wins power.
Rafal Benecki, chief economist at ING Bank Slaski SA, said the ruling party’s latest election-campaign promise to lower the age at which Poles can tap state pensions adds to the fiscal and inflation headwinds facing the bond market.
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