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NBP: MPC's Dabrowski Says Inflationary Processes Have Been "Extinguished"

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MPC's Ireneusz Dabrowski wrote on X that "inflationary processes have been extinguished" and the "inflation gauge is temporarily influenced by regulatory and fiscal policy." He further noted that if we exclude April and July readings (when the government reinstated VAT on food and partially withdrew energy subsidies, respectively), inflation (presumably last year) averaged at +0.218% M/M, which gives an annualised figure of +2.65% Y/Y. In our understanding, these comments were incrementally more dovish than before and somewhat inconsistent with Governor Glapinski's hawkish pivot, which was largely underpinned by considerable emphasis on the ramifications of regulatory decisions. By contrast, Dabrowski, who is considered to be a close ally of the Governor, seemed to look through regulatory factors.

  • Sell-side analysts appeared to agree that Dabrowski's post was more dovish than his earlier rhetoric, with some flagging the possibility that it might reflect a shift in the MPC's collective view.
    • ING commented that the Governor's hawkish turn is hard to justify, if the MPC evaluates inflation processes in the way outlined by Dabrowski. They believe that it cannot be ruled out that the MPC could start debating rate cuts after studying the next official inflation projection in March. They forecast a decrease in headline inflation to +3.0%-3.5% Y/Y by the end of 2025 and see scope for 75-100bp worth of cuts this year.
    • Pekao merely mentioned that Dabrowski's post represented a dovish shift compared with his earlier comments.
    • Santander assess Dabrowski's remarks were more dovish than his comments from November and December, when he had been suggesting that the optimal timing for rate cuts would be 3Q2025. They suspect that Dabrowski's latest comments could reflect a wider change of sentiment within the MPC.
  • Earlier this week, MPC's Kotecki reiterated that he expects disinflation to take hold from March, at which point the Council could already start discussing interest-rate cuts. He also reaffirmed his view that the Governor's hawkish rhetoric did not reflect the Council's collective assessment of the economy and rate outlook.
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MPC's Ireneusz Dabrowski wrote on X that "inflationary processes have been extinguished" and the "inflation gauge is temporarily influenced by regulatory and fiscal policy." He further noted that if we exclude April and July readings (when the government reinstated VAT on food and partially withdrew energy subsidies, respectively), inflation (presumably last year) averaged at +0.218% M/M, which gives an annualised figure of +2.65% Y/Y. In our understanding, these comments were incrementally more dovish than before and somewhat inconsistent with Governor Glapinski's hawkish pivot, which was largely underpinned by considerable emphasis on the ramifications of regulatory decisions. By contrast, Dabrowski, who is considered to be a close ally of the Governor, seemed to look through regulatory factors.

  • Sell-side analysts appeared to agree that Dabrowski's post was more dovish than his earlier rhetoric, with some flagging the possibility that it might reflect a shift in the MPC's collective view.
    • ING commented that the Governor's hawkish turn is hard to justify, if the MPC evaluates inflation processes in the way outlined by Dabrowski. They believe that it cannot be ruled out that the MPC could start debating rate cuts after studying the next official inflation projection in March. They forecast a decrease in headline inflation to +3.0%-3.5% Y/Y by the end of 2025 and see scope for 75-100bp worth of cuts this year.
    • Pekao merely mentioned that Dabrowski's post represented a dovish shift compared with his earlier comments.
    • Santander assess Dabrowski's remarks were more dovish than his comments from November and December, when he had been suggesting that the optimal timing for rate cuts would be 3Q2025. They suspect that Dabrowski's latest comments could reflect a wider change of sentiment within the MPC.
  • Earlier this week, MPC's Kotecki reiterated that he expects disinflation to take hold from March, at which point the Council could already start discussing interest-rate cuts. He also reaffirmed his view that the Governor's hawkish rhetoric did not reflect the Council's collective assessment of the economy and rate outlook.