Top macro theme(s):
- March Inflation Report – a turning point ahead? The inflation path in the new macroeconomic NBP projection has been substantially revised upward – in 2022 CPI should rise to 10.8% (from assumed 5.8% previously), in 2023 to 9% (from 3.7%) and in 2024 inflation will only mildly decrease, to 4.3%. GDP growth path has been only slightly reduced.
What else caught our eye:
- The MPC raised interest rates by 75bps pushing the reference rate up to 3.5% - the highest level since March 2013. Stronger move than during previous meetings (75 vs 50bps) was anticipated by the market because of the recent pressure on the PLN. The sudden rise of risk aversion triggered by the Russian invasion on Ukraine has temporarily pushed the EURPLN towards 5.00, as the PLN – like other CEE currencies – has become a proxy trade for geopolitical risks. We wrote more about the MPC decision in our Macro Flash: In defence of zloty. The NBP Governor A.Glapiński said on a traditional presser that the whole MPC is very hawkish and determined to squash inflation as fast as possible. According to A.Glapiński zloty is strongly undervalued and NBP shall do its best in order to make the currency appreciate. The Governor informed that the NBP is in talks with Fed, ECB and SNB concerning currency swap lines. We wrote more about the press conference in our Macro Flash: Quite a hawkish message from the NBP. We forecast that the key NBP rate will terminate at 4.5% after two 50bps moves in April and May.
The week ahead:
- CPI inflation has likely dropped to 8.2% y/y in February. The extension of Anti-inflationary Shield has on our estimates cut inflation by app. 2-3pp but higher fuel and food prices reduced its disinflationary effect. The CPI for January will be likely revised (from 9.2%, we expect additional 0.1-0.2pp) due to the CPI basket recalculation. Core inflation will likely rise to 6.1% y/y in January and 6.3% y/y in February.
- Industrial production has likely continued a strong upward trend in February and grew by 17.1% y/y, with strong inflationary pressure intact (PPI inflation at 15.3% y/y in Feb). The labor market data should indicate more and more tightening with wages growing by close to 10% y/y.
- EU fund inflows should improve the current account balance in January.
Number of the week:
- 5.845 – market quotation of WIBOR 3M rates in 6 months (FRA 6x9).