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Commerzbank on PLN and NBP

POLAND
  • While the Polish zloty and Hungarian forint both recovered substantially late last week – in high-beta fashion as the euro rallied – the zloty has remained the underperformer since the Polish central bank hiked rates by less than expected this month and signalled a possible end to monetary tightening.
  • NBP governor Adam Glapinski remarked to Bloomberg on Friday that the zloty’s recent depreciation was not significant enough to delay inflation peaking by Q3.
  • He forecasts inflation to peak at c.16% if the government’s inflation shield measures were extended. This would be no different, for example, from the 20% inflation peak the Czech National Bank’s board foresees this H2 (without imposing energy price caps and other one off measures).
  • The key question is: will this be a technical peak in the year-on-year rate of change as base-effects kick in, or a bona fide peaking followed by moderation because of dissipation of inflation drivers and tighter monetary policy?
  • Today’s core inflation reading may give some clues in this respect. But crucially, the zloty will likely extend its underperformance as long as NBP continues to sound sanguine that no further monetary tightening will be required.
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