MNI NBP Review - February 2023: Rates Steady Ahead Of March Projections

Executive Summary:

• The NBP left interest rates unchanged, in line with universal expectations, reaffirming its familiar assessment of the economy
• Governor Glapinski refused to formally end the rate-hike cycle but emphasised that the central bank must reckon with the social and economic costs of tightening
• The release of updated economic forecasts alongside the NBP's March meeting will provide much interest

Full review document including a summary of sell-side views here:

MNI NBP Review - February 2023.pdf

The National Bank of Poland left interest rates unchanged on Wednesday, in line with the consensus call, making this week’s decision a mere placeholder ahead of the potentially more interesting March meeting. The central bank reaffirmed its expectations that price pressures will moderate later in the year, with tight monetary conditions expected to support the disinflationary impulse in the quarters ahead. The next day, Governor Glapinski refused to formally declare an end to the tightening cycle and said that it would be premature to debate rate cuts now. However, he voiced his concern with the economic and social costs of any potential resumption of rate hikes, signalling a clear gradualist bias in achieving the inflation mandate.

The Governor’s remarks on exchange-rate developments may have taken some off guard. Glapinski noted that the Polish Zloty is a “strong” currency and there is no need for its appreciation, even as the PLN has been the second-worst EMEA performer this year and is lagging its CE3 peers CZK and HUF by considerable margins. The Zloty slipped as Glapinski spoke.

This monetary policy review was largely a placeholder ahead of the much more important March meeting. Next month, the NBP will publish an updated set of economic forecasts, which will feed into the subsequent deliberations of the MPC. Market participants will be looking to the publication of the new projections to reassess the implied rate path. For now, we interpret Governor Glapinski’s comments as an indication of the MPC’s collective preference for continued interest-rate stability, with an implicit dovish bias coming through despite lip service being paid to hawkish considerations. We recognise the potential for the March forecasts to tilt the MPC in either direction. That being said, as things stand, the odds of the resumption of the rate-hike cycle are low.