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Makro Flash: Moc w przetwórstwie
It’s not the last word on the matter
The MPC raised NBP rates by 50bps (the reference rate to 1.75%, the highest since March 2015). The post-meeting statement suggests that market valuations indicating a rise in the reference rate above 3% in the next 12 months might be too aggressive. On the other hand, comments from governor Glapinski at presser on Thursday suggest that the MPC definitely has not said the last word yet.
Poland Macro Weekly: It’s getting tricky
It’s getting tricky: lower inflation, higher rates, stronger PLN. The government announced an anti-inflation package. Temporary tax cuts will lower the expected inflation peak by app. 1.5pp. Despite the package, the NBP will stay in the tightening mode. Higher rates, strong activity results and verbal interventions from both the NBP and the government should support the PLN.
Macro picture is getting cloudy
Macro picture is getting cloudy. The 12-month rolling current account surplus fell to 0.4% of GDP. The buffer that protected the PLN from excessive weakening in 2020 and enabled the NBP to conduct low-rates policy is fading. Additionally, the combination of labour market data and expected further increase in inflation indicates a growing risk to our forecast of strong real consumption growth next year.
Can households afford NBP rate hikes?
On November 3, the MPC delivered yet another larger-than-expected interest rate hike (+75bps). We think that inflation will continue to surprise the MPC on the upside in the coming months and trigger further hikes. We do not assume, however, that rates will rise significantly above 2.00%. Our baseline scenario assumes a hike by 50bps in December and by 25bps in January. The risk however is still skewed towards a more pronounced tightening. Despite interest rate hikes, Polish households are characterised by a high capacity to withstand the increase in the debt servicing costs.
Inflation dilemma could reignite policy tightening
According to our estimates, the new NBP projection will show lower GDP growth path in the short-run and a higher CPI inflation path within the next few quarters. However, the headline inflation rate should continue to ‘converge’ to the target level towards the end of the projection horizon. CPI projection might be outdated from the very start after inflation unexpectedly skyrocketed to 6.8% y/y in October. Given the latest news, we expect the MPC to deliver 50bp hike in November.