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JPMorgan Say Risks Of Premature NBP Cuts From September Increasing

POLAND
  • JPMorgan note the majority of the Glapinski-led MPC is clearly dovish leaning, having expressed multiple times a hope/desire to reduce interest rates later in the year if possible (the bar for “possible” doesn’t appear very high).
  • For comparison, just consider the hawkish stance of the CNB, where the inflation data (not to mention growth) is indisputably more favourable to a dovish narrative, or the cautious tone of the NBH with an interest rate that nearly triples the NBP’s.
  • The release of better-than-expected CPI data is likely to reinforce the NBP’s optimism on the disinflation path and, hence, increases the odds of rate cuts being delivered from September onwards. If JPMorgan’s inflation forecast materializes, they think this would be a premature move, as core inflation would still be considerably above the policy rate (currently 6.75%).
  • They note that their opinion is unlikely to be a deterrent, and have to consider the views of the decision maker, which clearly suggest risks are increasing of an early cut.
  • Most likely, the scope for early rate reductions would be limited before it could trigger meaningful payback on the FX front, so JPM can imagine limited 75-125bps cuts before a new pause would be required.
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