MNI NBP Preview - May 2023: Another On-Hold Rate Decision

Executive Summary:

• The NBP are widely expected to keep interest rates unchanged.
• PLN appreciation and downside surprise in flash April CPI to support NBP doves.
  
• The focus will be on Governor Glapinski's press conference.

MNI NBP Preview - May 2023.pdf

The National Bank of Poland are expected to leave interest rates unchanged for the eight consecutive meeting in another split decision. The latest headline CPI print surprised to the downside while several dovish policymakers flagged potential for interest-rate cuts by the end of this year. Although core price pressures remain stubborn, this should be enough for the dovish-leaning majority in the Monetary Policy Council to stick with their familiar stance. As has become a norm for the NBP, Governor Adam Glapinski’s press conference will steal the limelight amid virtually universal expectations of an on-hold rate decision.

Market participants remain on the lookout for a formal end to the rate-hike cycle. We think that Poland’s central bank has not reached that point yet and will keep its options open as an insurance policy. However, the Governor will most likely deploy familiar rhetoric, signalling his dovish inclinations and framing more dovish scenarios as his “hopes” and “personal views.” Looking further afield, the next move in Polish rates will be down, albeit there is substantial uncertainty as to whether the central bank will be able to loosen monetary policy as soon as by end-2023.