Poland: Central Bank Sets Guidance For Exit Strategy

The National Bank of Poland has opened the door for monetary policy normalisation. We see tapering starting in 2H21 and the first rate hike in 1H22, earlier than our previous baseline of 2H22. The Council was behind the curve and should catch up soon. The strong fiscal stimulus from the Recovery Fund and local budget are also arguments for the NBP to act.

The unchanged NBP view on current inflation

On Friday NBP Governor Glapinski held a press conference following this week's MPC decision. This month the Monetary Policy Council left interest rates unchanged, but our take from the meeting was that the dovish camp softened significantly as well as the MPC's confidence about the temporary nature of elevated CPI. Following these changes the NBP governor tweaked his rhetoric significantly. Professor Glapinski sounded significantly less dovish than last month, he set the guidance for exit strategy from the current ultra-accommodative monetary policy and named the triggers which should further change MPC attitude.

The beginning of the press conference was quite similar to the previous one. The NBP view on current inflation hardly changed. According to the NBP governor, the elevated CPI is caused only by the factors outside of the monetary policy impact. The supply factors, which cause high CPI are oil prices, electricity (both 2 percentage point contributions out of 4.3% year-on-year in April 2021) and garbage collection prices. According to the NBP, the demand pressure is very limited and should stay low in the following months of 2021. He also denied that the accommodative monetary policy is responsible for the highest CPI in the EU.

NBP opens the door for monetary policy normalisation

However, what changed were the comments on future monetary policy. Governor Glapinski said the MPC no longer discusses rate cuts, is ready to tighten if needed and was less confident that rates should stay flat till the end of the MPC Term in 1H22.

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Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

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