MNI NBP Preview - March 2024: Extended Pause

Executive Summary:

• The market sees another on-hold decision as a done deal.
• The NBP may extend the forecast horizon in its new projection through end-2026.
• The government's fiscal and regulatory decisions remain key for the outlook.

Full preview including a summary of sell-side views here:

MNI NBP Preview - March 2024.pdf

The recent weeks have seen consensus consolidate around the view that the National Bank of Poland (NBP) could keep interest rates unchanged for several quarters, possibly through the remainder of the year. With the Monetary Policy Council (MPC) heading into its final rate decision of 1Q2024, we expect them to stay on hold this time around and consider it likely that monetary policy settings will remain fixed through end-2024. However, this does not make this week’s meeting a mere placeholder. The central bank will unveil the details of its updated macroeconomic projection, which will inform their deliberations in the coming months.

Along with virtually unanimous consensus, we expect the Council to keep its monetary policy settings unchanged on Wednesday and the Governor to signal that an extended pause is the most likely scenario. The next window of opportunity for rate cuts, in our view, will be in Q4 – and even this is not a done deal. It will be worth scrutinising the new inflation projection, even if it might be based on shaky assumptions regarding the aforementioned fiscal and regulatory decisions. In November, NBP analysts decided to hold off on extending the forecast horizon by another year through end-2026. As a result, they are expected to do it this time around and hence the new projection will tell us if they expect inflation to return sustainably to the tolerance band around the +2.5% Y/Y target by end-2026.