Poland’s central bank president: Inflation on target, but rate hike risks have risen
The desk interprets the National Bank of Poland's recent shift towards a more hawkish stance as a significant signal for potential monetary tightening. Per the full note source, the central bank's president indicated that while inflation is currently above the 3.5% threshold, the decision to raise rates will depend on the duration of this inflationary period and forecasts aligning with the NBP's target. This nuanced positioning suggests that the central bank is closely monitoring inflation dynamics, which could lead to a shift in policy if inflation persists. Our analysis aligns with this cautious optimism, particularly as the market begins to price in increased odds of a rate hike in the near future.
What the desk is arguing
The National Bank of Poland's Monetary Policy Council has shifted to a slightly more hawkish stance, though it remains in wait-and-see mode. A rate hike now depends on how long inflation persists above 3.5% and whether projections confirm a return to the 2.5% target.
CPI risks appear balanced, but the probability of a hike has increased. The council is implicitly rejecting the view that current inflation is transitory and that no policy tightening is needed.
Where it sits in our coverage
This aligns with our view that Polish rates will remain on hold for now, with risks skewed to the upside. We see the reference rate unchanged at 5.75% through Q1 2025, with a potential 25bp hike in Q2 if inflation stays elevated.
Firm consensus for EUR/PLN is around 4.30, with a range of 4.20-4.40. Our internal view sees PLN supported by hawkish NBP rhetoric.
How other firms see it
ING is aligned with this slightly hawkish assessment, noting that the odds of a hike have risen. Barclays also sees risks tilted to the upside for rates, expecting a hold in the near term.
Contrary views come from Morgan Stanley, which expects rates to remain on hold through 2025, arguing that inflation will moderate without further tightening.
Key takeaways
- 01NBP turns slightly hawkish but stays on hold.
- 02Hike contingent on inflation persisting above 3.5%.
- 03CPI risks balanced but probability of hike has risen.
Market implications
PLN may strengthen on hawkish bias; zloty bonds could see slight sell-off on elevated hike risks.
Risks to this view
Downside risk: inflation falls faster than expected, delaying any hike. Upside risk: persistent inflation forces earlier tightening.
Sources & References
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