NBP forecasts: Will Glapiński disappoint market expectations? Euro at PLN 4.80 already in December

Dov Herman

3 years ago

Adam Glapiński, NBP governor Already on Wednesday at the meeting on November 9, the National Bank of Poland (NBP) will most likely raise interest rates by 25 basis points, although the chances of no change are also relatively high. The outlook for inflation in our country has not improved and the markets are calling for further tightening. On the other hand, comments of the Monetary Policy Council have been very dovish recently. Still, experts from ING Bank remain convinced that the NBP will not meet market expectations regarding the final rate, which may result in a weakening of the Polish zloty in the longer term and forecast another increase in the EUR / PLN exchange rate to the region of 4.80.

According to experts, the prospects for our country for 2023 remain gloomy
Core inflation in Poland will remain high in 2023
The MPC will provide no more than 50 bp of additional hikes, while the market is still price in around 100 bp, experts emphasize
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Zloty exchange rate (PLN): All eyes on the MPC – ING

Revised quarterly GDP data indicate stronger economic growth in Poland in the first half of 2022 and probably throughout 2022. However, experts believe that the outlook for our country for 2023 remains gloomy and they still see threats to their forecast 1.5% GDP for the coming year. Inflation will not calm down and will only peak above 20% year on year in February 2023. Although it is expected to start falling to around 10% later, our models indicate that core inflation will remain high in 2023, the ING report said.
Interest rates in our country are rising systematically in 2022. Less than a day before the decision, all eyes are on the MPC, which has refrained from increasing rates in October and declares that it is close to ending the cycle. In the opinion of analysts, the November macroeconomic projection may unfortunately be a delayed opportunity to clarify or change forward guidance.
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– With signals from the government that they are afraid of low confidence of buyers of Polish government bonds due to the CPI risk and excessive spending in the 2023 election year, we expect that policymakers will decide to raise interest rates by 25 bp. However, we would not be surprised if the rates remained unchanged, in line with the recent dovish comments of the MPC – added.

Foreign exchange markets: The euro exchange rate will return to the level of 4.80 per zloty (PLN)

The report also emphasized that the zloty valued a significant part of the CEE premium due to the high costs of financing the position against the zloty, cheaper natural gas and politicians considering “resetting relations” with the European Commission in order to unlock the Recovery Fund.

– However, we are afraid that the Polish currency will not find sufficient support from the NBP policy at the end of the year. We expect the MPC will provide no more than 50bp of additional hikes, while the market is still trading at around 100bp. Therefore, we see EUR / PLN above 4.80 in December 2022, and the scale of the depreciation largely depends on the general sentiment, the main EUR / USD pair exchange rate and the issue of the Recovery Fund, it was noted.

EURPLN daily rate, tradingview – The NBP rate hikes so far are starting to work slowly. It seems that the Polish monetary policy, which has applied a solid anti-inflationary injection since October 2021, is starting to have increasingly strong effects. At the beginning we witnessed a decline in demand for loans, especially housing loans, then the PMI index fell below 50 points, and now it seems that we will gradually move to the next phase, in which the anti-inflationary effects of the previous rate hikes will become more visible. I think it is very likely that 2023 will be a year of gradual decline in various inflation measures in Poland, not only consumption inflation, but also consumption base inflation and production inflation – commented former MPC member Eryk Łon a few days ago. Consumer inflation in Poland is systematically growing, although the selling pressure on the zloty (PLN) and Polish government bonds has weakened at least for some time. At the same time, neither the theory of the summer peak in CPI inflation, nor the “inflation flattening” scenario predicted by the National Bank of Poland and President Adam Glapiński himself proved successful.
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