Market Looks For More Clarity On NBP's Reaction Function

Below summarises sell-side views on NBP released in the interim between yesterday's decision to keep rates unchanged and today's press conference with Governor Adam Glapinski (14:00GMT/15:00CET).

• BOS Bank write that the NBP's reaction function has changed, with the emphasis shifting from current inflation to the inflation outlook and its determinants. They think that the odds of rate cuts in the next few months have dropped to near-zero and the bar for further monetary easing has been raised significantly. They tentatively pencil in 50-75bp of cuts for 2024, with today's presser set to provide more clarity.
• Citibank think that rates might be held for an extended period, possibly until 2H2024, but Governor Glapinski may clarify plans during his media briefing.
  
• Commerzbank note that while political motivations may have been a factor behind the pause, they expect the press conference to "mirror the textbook view contained in the statement".
  
• Credit Agricole think that uncertainties around fiscal and regulatory policy will remain relevant in the coming months, reducing the potential for further rate cuts. Hence, they see a significant upside risk to their current rate forecast (reference rate at 5.50% in 2024), hoping that today's press conference will shed some light on the monetary policy outlook.
• Goldman Sachs assess that the latest decision appears to mark a change in the NBP's reaction function. They think that the NBP could re-commence cuts in 1Q2024.
  
• JP Morgan are "biased for a long pause in the easing cycle" but are waiting for the Governor's press conference before making adjustments to their call.
  
• mBank believe that the window for rate cuts has closed until at least the next inflation projection (March). They note that "the MPC's glasses have fogged up" and the panel sees heightened uncertainties ahead. Swapping their baseline and alternative scenarios, they now expect a prolonged stabilisation in rates (possibly through end-2024).
• Millennium Bank write that Governor Glapinski's comments on future rate decisions depending on the final shape of fiscal policy in 2024, the cooperation with the new Finance Minister and the conditions for further rate cuts will steal the limelight during today's press conference. They assume that rates will stay unchanged in the coming months, at least until March 2024.
• Pekao write that the "short era of automatism in domestic monetary policy is over and the pace of rate cuts will fall in the coming quarters" - we may learn by how much from today's presser with the Governor.
• Santander see the pause in monetary easing as a sign that the NBP's reaction function is evolving after the elections, with the central bank becoming increasingly focused on stabilising inflation rather than economic growth. They now expect interest rates to remain unchanged for the better part of 2024.
• Societe Generale think that any comments justifying the 100bp cumulative cuts in September and October versus the on-hold decision yesterday will be eyed during today's presser, as they may clarify the NBP's reaction function. They expect the NBP to hold rates until 3Q2024.