MNI NBP Preview - January 2023: Pause Or Peak?

Executive Summary:

• Expected to keep rates unchanged at its first meeting of 2023
• Dovish quarter of the MPC seen sticking with its preference for rate stabilisation
• Data flow since the December meeting has offered little to move the needle

MNINBPPrevJan23.pdf

The final reading of headline CPI inflation for November was revised 0.1pp higher, with core CPI printing marginally higher than forecast as a result. The deviation from expectations was minuscule and did not influence broader perceptions about underlying price dynamics. As things stand, majority in the MPC still expect inflation to reach its peak in 1Q2023 and ease off from there, as the base effect and delayed impact of earlier rate hikes kick in.

Lending support to this train of thought, official survey data revealed that inflation expectations among Polish consumers are falling. The relevant subindex in the local statistics’ bureau report on consumer confidence dropped to 33.2 in December, reaching its lowest point since August 2021. On the other hand, some analysts have pointed to the strong historical correlation between inflation expectations and current inflation, casting doubt on the predictive power of forward-looking consumer sentiment. The NBP will likely read the latest insights on inflation and inflation expectations as a clue to maintain a wait-and-see stance.