MNI NBP Review - November 2023: Post-Election Pivot

Executive Summary:

• The NBP paused its easing cycle, defying expectations of a 25bp cut.
• The Council flagged heightened uncertainty around the outlook.
• Governor Glapiński said there might be more clarity in January/March.

Full review document including a summary of sell-side views here:

MNI NBP Review - November 2023.pdf

The National Bank of Poland pressed pause on its monetary easing cycle after delivering two back-to-back rate cuts in September (75bp) and October (25bp). Apart from the impact of rate reductions delivered thus far, it was elevated uncertainty around the future trajectory of fiscal and regulatory policy that led the Monetary Policy Council to stand pat on rates. Poland’s central bank reaffirmed its “wait-and-see” stance, while the key message conveyed by Governor Adam Glapiński during his press conference was that the inflation outlook comes with significant risks. The language deployed by the Governor was significantly less dovish than at his previous pressers, which suggests that the NBP may stand pat in through end-2023.

We believe that this week’s monetary policy decision reduces the odds of further rate cuts anytime soon. The central bank’s reaction function seems to have evolved, with less emphasis placed on current inflation readings, less sensitivity to headwinds to economic growth and more focus on the inflation outlook and associated risks. Barring unexpected shocks, the MPC looks set to switch on cruise control at least until March, when we can expect the next “live” meeting. By this point, the new government should already announce some of the key fiscal and regulatory decisions, which in the NBP’s view are crucial for the future inflation path. Furthermore, the Council will have a fresh macroeconomic projection at its disposal and this time around NBP analysts will be able to fine-tune the assumptions behind their forecasts. While it is difficult to make any definite calls at this stage, the NBP looks set to keep rates on hold in the coming months.