Will 5% Be The New 10%?

NBP Governor Adam Glapinski guides that interest rates will be cut further if inflation is seen falling quickly towards +5% Y/Y and below that level. The Governor's rhetoric around that level suggests that it may become the next quasi-target for the MPC after a break below +10% Y/Y.

• Note that at his previous press conferences the Governor cited research in behavioural economics suggesting that consumers do not notice annual price hikes of less than 5%, which may have significant psychological consequences.
• Prior to this week's meeting, multiple MPC members were indicating that it would be an important factor in the decision-making process if inflation declined below +10% Y/Y, albeit this approach has been rejected by the three hawkish dissenters.