Governor Says Prior Cuts Reduced Scope For Easing, While Uncertainty Increased

NBP Governor Adam Glapinski confirms that the Monetary Policy Council discussed the new macroeconomic forecast prepared by staff. He notes that the projection implies that inflation will keep falling, albeit at a slower pace than before. However, it should reach the inflation target at end-2025. The official adds that it means that the moment of achieving the inflation target has not changed from the previous forecast, despite the 100bp worth of monetary easing delivered by the NBP in September and October.

• The Governor says that the Council's decision to keep interest rates unchanged yesterday was justified by two main reasons: (1) after a 100bp adjustment to interest rates, the scope for further monetary easing has narrowed; (2) uncertainty around the inflation path in the coming quarters has increased significantly. He says that the order doesn't matter, both reasons were equally important.
• The Governor now points to uncertainty surrounding fiscal and regulatory policy in 2024 in the wake of the recent elections. He says that the policy agenda of the incoming government is unknown at this stage - e.g. it is unclear if certain anti-inflationary measures will be extended. Hence the latest NBP macroeconomic projection might not be as accurate as the previous ones.
• Glapinski notes that the next projection (which is due in March 2024) will be a key signal on the monetary policy outlook, because it will be prepared once the incoming administration adopts an amended 2024 budget bill, which will provide more clarity on fiscal and regulatory policy.