No change at the NBP

The National Bank of Poland maintained the policy rate at 5.75% for the sixth successive meeting, a move widely expected by markets.

Indeed, all 31 economists surveyed by Bloomberg had predicted no change in policy stance. Coupled with the accompanying statement offering little new information for markets when compared to March, today’s decision has left the zloty largely treading water in advance of NBP Governor Glapinksi’s press conference tomorrow.

Arguably the only change of note in today’s commentary was a recognition of recent inflation developments, with preliminary readings for March significantly underperforming expectations.

Having been expected to print at 2.3% YoY, March CPI growth actually fell to 1.9%, a notable undershoot of the NBP’s 2.5% inflation target. Moreover, as observed in today’s policy statement, this also means that core inflation likely dropped significantly once more last month.

Whilst this was again caveated with a note that uncertainty persists, stemming from fiscal and regulatory changes, in our view this still leaves today’s commentary with a marginally dovish slant.

That said, this also seems to be in keeping with recent statements by some MPC members, which we interpreted as similarly beginning to tilt more dovish at the margin. Granted, such a shift is perhaps unsurprising – if the MPC is as data dependent as policymakers insist, then softer inflation should lead to a more dovish stance. More specifically, despite expectations for inflation to reaccelerate later in the year, this should be less of a concern if it takes place from a lower than anticipated base.

All told, barring a rapid reacceleration in inflation moving forwards, we suspect the MPC will continue to tilt cautiously in favour of re-starting rate cuts in the coming months. We have pencilled in June as a potential re-start date for easing for now.

That said, given this rests on an assumption that economic developments continue to remain benign, risks are skewed towards policy easing being delayed until later in the year. In fact, we also see risks that non-economic developments could also weigh on the NBP’s thinking too.

Specifically, tensions between the central bank and the government could potentially see the NBP take a more cautious approach than we currently envisage.

On both scores, Governor Glapinski’s press conference is likely to be more informative than today’s communications.

Author: 

Nick Rees, FX Market Analyst

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