PKO Expect NBP To Cut Key Rate To 5.50% This Year, To 4.50% Next

In their quarterly economic bulletin, PKO write that the Polish economy is likely past the bottom of the cycle GDP should return to growth from 3Q2023. They expect growth to gradually accelerate, reaching the pace of +3% Y/Y for the full 2024. The recovery in private consumption is expected to be a key driver of the improvement in overall growth momentum, while investments will provide a countercyclical factor amid the expected shortfalls in EU financing.

• They expect headline CPI inflation to fall quickly to around +4% Y/Y in spring 2024 before it stabilises around +4%-5% Y/Y. There is much uncertainty around the inflation outlook, with tax changes (VAT on food items) and administered prices (energy) providing the key unknowns.
• The NBP is expected to continue cutting interest rates but will likely turn more cautious following the "nervous" market reaction to the September decision. PKO expect the central bank to bring the key rate (currently at 6.00%) to 5.50% by the end of this year and to 4.50% by mid-2024.