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ING Sees 100bps Rate Rise This Month

POLAND
  • An extended period of elevated inflation lies ahead. We forecast average annual CPI of over 13% in 2022, with a peak of 15-20% YoY in 4Q22. The commodity shock was so strong and widespread that inflation will remain elevated even when GDP returns near to its potential.
  • More worrisome is that core inflation shows one long stream of month-on-month rises, which we find as evidence of second-round effects.
  • Hence, the rhetoric of the National Bank of Poland remains very hawkish. We expect a series of recent CPI surprises to force the Council to increase rates by 100bp this week, above market expectations (75bp). We believe the MPC will continue raising rates, bringing the reference rate to the target level of 8.5% in late 2022/early 2023.
  • With expansionary fiscal policy, we see rate cuts no sooner than in 2024.

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