Kotecki Says Inflation May Peak Above +20% Y/Y, Suggests NBP's Projection Is Too Optimistic

NBP's Kotecki tells Parkiet in an interview that the consensus among most MPC members seems to be that the rate-hike cycle is over, which also seems to be the view of the market. He added that it is too early to discuss rate cuts to avoid boosting inflation expectations.

• Kotecki refuses to disclose the vote split from this week's monetary policy decision, says he can only speak for himself. However, he emphasises the importance of the NBP's inflation mandate, adding that raising interest rates by 100bp would be too big "at this stage," but hiking in 25bp increments "could be too small." Note that he is one of the three usual hawkish dissenters in the Monetary Policy Committee.
• Kotecki sees the NBP's current inflation projection as unrealistic. He says inflation is persistent and it will take time to bring it back to the target. Marginal disinflation in November was exclusively due to energy commodities, but core inflation will not slow too quickly. "Unfortunately the peak of inflation is still ahead. In my opinion, we will see this peak in February and unfortunately it can exceed +20.0% Y/Y (...) I have growing confidence that this will be the case."
• Kotecki says that inflation expectations are at record highs, which is hindering efforts to contain actual inflation; the central bank shouldn't rush with admitting that inflation is under control. Discussing rate cuts too early could unnecessarily pour fuel on inflation expectations.
• The official says that the worst quarters for economic activities will be 4Q2022/1Q2023. Hence, if the NBP tightened policy now, fresh interest-rate hikes would affect the economy well after this sensitive time.