Inflation Exp. To Reach +5.2% Y/Y At Year-End; No Chance For '24 Rate Cuts Under This Scenario

Governor Adam Glapinski says that if the partial withdrawal of anti-inflationary measures is implemented in the shape proposed by the government, headline inflation is expected to accelerate to +5.2% Y/Y into the year-end. If all anti-inflation measures were cancelled, then inflation would accelerate to +7.5% Y/Y.

• The Governor guides that the probability of rate cuts this year under the baseline scenario (i.e. Inflation at +5.2% Y/Y at year-end) is equal to zero. He adds that there is no discussion of loosening policy and no such calls from MPC members.
• The Governor speculates that "perhaps in 2025" inflation will decline to the target and there will be no prospects of renewed acceleration, which could fuel rate-cut debate. However, he quickly points to the MPC's neutral bias, noting that the panel would not hesitate to raise rates if needed, even as it is not expected.
• The Governor says that he read previews suggesting that analysts were looking for dovish overtones in today's press conference. He says that there are no reasons to be dovish and describes his own comments as "hawkish."
• The MPC continues to focus on core inflation as a key indicator of underlying price pressures; there is much uncertainty around current forecasts related to geopolitical factors around the world. The Governor says that zloty appreciation helps contain inflation, adding that the PLN may strengthen further, as rate differentials will widen amid ECB/Fed rate cuts.