TOP MACRO THEME(S):
- The MPC hiked rates by 50 pb: Facing elevated inflation and most likely incoming recession, the Monetary Policy Council, in line with our expectations, raised interest rates “only” by 50 bp. A cautious approach adopted by the MPC, in our opinion, increases the probability that the tightening cycle might be concluded in September by delivering one more hike by 50 bp.
WHAT ELSE CAUGHT OUR EYE:
- Head of Energy Regulator (URE) informed that energy utilities have filed for central heating price hikes for households (2.4% share in inflation basket) of 50-300%. In his view however, on average prices will rise “only” dozens-fold.
- Minutes from the MPC meeting in June were a non-event.
- Voting details from the MPC meeting in April revealed that P.Litwiniuk was a naysayer to the 100 bp rate hike.
- Unemployment rate in June declined to 4.9% (PKO and cons.:5.0%) on early MinLab estimates.
- According to the Credit Information Bureau (BIK) data, the demand for mortgages has fallen to the lowest level at least since January 2007, i.e. from the moment when BIK started to collect the data. In June alone, the number of applications decreased by 59.7% y/y and by 18.1% m/m. The weaker demand is mainly the result of interest rate hikes and deteriorating consumer sentiment.
THE WEEK AHEAD:
- CPI inflation has most likely peaked in June (15.6% y/y in flash estimate), but will stay elevated in the holiday season before it starts to decline gradually. Energy and food prices remain the key upside risk for our baseline.
- Current account balance in May most likely deteriorated further signalling a downside risk to our full-year forecast (-3.5% of GDP). Energy commodity prices still weigh on Poland’s external balance.
NUMBER OF THE WEEK:
- 12% – the basic PIT tax rate as of July 1st (down from 17%); the tax rate cut should be supportive to consumption ahead.