Local Sell-Side Desks React To MPC Statement, See Hawkish Tweaks To Communique

The National Bank of Poland left interest rates unchanged yesterday in a widely expected decision but introduced some tweaks to its statement. The three main additions concerned (1) a reference to the significant impact of the eventual expiry of anti-inflation shields; (2) a reference to considerable wage increases; (3) the emphasis that inflation must return sustainably to the +2.5% +/- 1pp target. Hawkish adjustments to the statement prompted sell-side desks to align more closely around a "higher-for-longer" scenario. Below we summarise views released by local desks in the interim between the rate decision and Governor Glapinski's presser slated for this afternoon.

• Alior Bank write that the MPC "puts the ball in the government's court" by putting more emphasis on fiscal and regulatory policies rather than current CPI readings. They maintain their call for 75bp worth of rate cuts this year but see an increasing risk that the scale of easing might be smaller.
• Bank Pocztowy write that the statement contained nothing surprising, despite some minor adjustments. They believe that overall uncertainty will prevent the MPC from cutting rates this year.
  
• BOS Bank note that the statement testifies to the MPC's intention to moderate market expectations of monetary easing in the coming months. They believe that the MPC will only lower rates at the end of 2024, delivering two 25bp cuts. The risks around this forecast are elevated due to the uncertainty around the MPC's reaction function.
  
• ING see "zero chance" of even cosmetic rate cuts through the remainder of this year after the NBP's communications turned more hawkish. The statement, in their view, reflects a growing concern about the rebound in inflation expected later this year. Hence, they scrap their call for a 25bp rate cut towards the end of the year and think that Governor Glapinski may today tone down expectations of monetary easing.
• mBank note that statement changed to some degree and the adjustments were "few but quite significant." The MPC acknowledged slow growth last year and progress in fighting inflation, but also included an explicit warning of the impact of the expected termination of anti-inflation measures (signalling concern about even a temporary spike of inflation) and of considerable wage hikes (mBank estimate: +11.7% this year). The MPC also stressed the need to return inflation sustainably to the target. These changes raise the bar for rate cuts, in mBank's view.
• Pekao see "no surprises" from the MPC and maintain their call for no change in rates until the end of 2025.
  
• PKO believe that the tone of the February statement was similar to previous communique. However, the MPC seems to attach greater weight to medium-term inflation outlook, and lesser weight to current inflation and economic activity data. They see potential for a small correction of rates in March, but also note that a scenario of unchanged rates through end-2024 is becoming equally probable.
  
• The Polish Economic Institute note that rates are already above their estimates of CPI inflation in January and February. This should inspire a debate on renewed rate cuts, but MPC rhetoric implies a hawkish stance. They see the reference rate at 5.00-5.25% at end-2024.
• Santander draw attention to hawkish tweaks to the statement, i.e. reference to the eventual expiry of anti-inflation shields and the implementation of public-sector wage hikes, as well as acknowledging the need to bring inflation sustainably to the target. They see the statement as hawkish and expect the Council to resume monetary easing only at the end of the year and cut rates by 50bp in 4Q2024.