PLN: Still no change – Commerzbank

Poland’s central bank (NBP) will announce its monthly interest rate decision today. It is unanimously expected that the CB will not change its base rate or guidance today, Commerzbank’s FX analyst Tatha Ghose notes.

Polish inflation moderates to close to target

“Policymakers will likely cite the 5% inflation rate (last headline reading; last core reading was 4.3%) as the reason not to consider rate cuts. At this time, the zloty exchange rate is also weak from rising global market risk aversion, which adds further justification for policy caution. The underlying reality, however, is that Polish inflation, like inflation in many other EU countries, has already moderated to close to target on seasonally-adjusted month-on-month basis.”

“A recent upward spike from the unwinding of pandemic era energy and food pricing measures had almost negligible impact and quickly settled down. In this environment, there is no real justification for maintaining a 5.75% interest rate, in particular as the real economy has entered a soft patch. But, NBP’s monetary policy is basically ‘politicized’, with (governor) Adam Glapinski’s MPC faction digging its heels in against rate cuts since the time its political opposition came to power.”

“We anticipate nothing else but a repetition of such points today and at Thursday’s press conference. We maintain that this artificially held hawkish monetary stance should not be working positively for the zloty’s valuation as it represents a breakdown of proper monetary policy – it should act as a drag, instead.”