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NBP Surprised Market With a 75bps

POLAND
  • The positive surprise in inflation in October, with CPI surging to its highest level in 20Y, resulted with another aggressive hike from the NBP yesterday.
  • The central bank decided to raise its benchmark rate by 75bps to 1.25% (vs. 25bps hike expected), and opened the door for another hike at the December's meeting.
  • Governor Glapinski mentioned during the press conference that a rate hike next month was more likely than not.
  • Inflation forecasts were also reviewed to the upside, with CPI now expected to average 4.8%/4.9% in 2021 (vs. 3.8%-4.4% previously) and between 5.1%/6.5% in 2022 (vs. 2.5%-4.1% previously).
  • Hence, yesterday's meeting showed that NBP doves are 'less powerful' than market expected.
  • With inflation expected to peak in January above 7% (according to Glapinski), it is likely that NBP will keep raising rates in the coming meetings.
  • The move on the PLN was disappointing though given the magnitude of the hike; for instance, the zloty gave up most of its yesterday's gains against the USD (or JPY).
  • This shows that PLN remains vulnerable against major crosses as other major risks may also impact domestic asset prices in the near to medium term (EU Fines, Delay in EU funds, Covid uncertainty, Rising LT bond yields…).
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