Citi Handlowy Expect NBP To Stand Pat This Week But Admit It's Close Call

Ahead of the NBP's monetary policy decision tomorrow, Citi Handlowy remind that the Governor pointed to inflation being in single digits as a condition for lowering interest rates. They write that "taking earlier communications literally, the condition formulated by central bank members has not been satisfied yet," which is why the MPC "should at Wednesday's meeting keep interest rates unchanged."

• Citi's baseline scenario assumes no change to interest rates this week, but they believe that "the September meeting is one of those relatively rare meetings, when the risk of a change in interest rates is close to 50-50." They note that signals coming from the MPC suggest that the Council can't wait to start the easing cycle, while CPI inflation will likely fall to +9% Y/Y or below already in September.
• They note that it does not matter too much for economic growth or inflation whether the MPC cuts rates in September or October. However, this week's decision will show the MPC's determination to bolster its credibility and convince market participants to take its guidance seriously in the future.