Poland Macro Weekly: Cautiously with restrictive monetary policy

TOP MACRO THEME(S):

The consequences of highly restrictive monetary policy are not so obvious (p. 2) – The MPC is becoming increasingly hawkish and monetary policy in Poland is to remain highly restrictive in the following quarters. We examined its potential negative effects, including a plausible shift to foreign financing, as well as costs to real economy outweighing the benefits of marginally stronger disinflation.

WHAT ELSE CAUGHT OUR EYE:

Several MPC members softened the tone of the Governor’s Glapinski recent comment suggesting that interest rate cuts could be possible in 2026 at the earliest. Wnorowski indicated that according to the July projection of the NBP, inflation is expected to start decreasing in 2h25, which could serve as a basis for interest rate cuts in 2025. He considered market estimates suggesting cuts of 75bp in 2025 as a possible scenario, implying that stronger monetary easing was also conceivable. H.Wnorowski assessed that Governor A.Glapinski's statement that NBP rates could remain unchanged until the end of 2026 was a misunderstanding (rather a reference to to the assumption of stable rates adopted in the projection, than a forward guidance). C.Kochalski believes that the central bank may consider the easing of monetary policy no earlier than after March 2025. In his opinion, current macroeconomic forecasts rule out the possibility of accelerating such a decision. All these comments are in line with our scenario assuming the first cut in July 2025 (more on p.2)
The Ministry of Finance confirmed that it is in the process of industry consultations regarding changes in the excise duty. According to prior information, Ministry considers a greater than previously planned increase in excise duty on alcohol and cigarettes from January 2025. Our estimate based on media reports points to marginal impact of this change on inflation.

THE WEEK AHEAD:

Monday will bring the final estimate of June inflation, followed by its core measure – both are likely to have limited impact on the market assessment of monetary policy outlook. More importantly monthly macroeconomic indicators for June will be published, enabling us to refine GDP growth estimate for 2q24 (current estimate: 3.6% y/y compared to 2.0% y/y in 1q24).

NUMBER OF THE WEEK:

-132,8 thous. – the decline in Polish population in 2023, the strongest in the EU.