Poland Macro Weekly: Down with the NBP rates

TOP MACRO THEME(S):

Housing market: Demand recovers while supply is depressed – An increase in demand, coupled with limited new housing supply (a consequence of six consecutive quarters of negative dynamics in housing projects initiated), leads to a return of rising housing prices.

WHAT ELSE CAUGHT OUR EYE:

CPI inflation declined in September to 8.2% y/y from 10.1% y/y in August. In monthly terms prices decreased by 0.4%, meaning that they have not been rising for 6 months. For the first time since the pandemic, prices of goods and services belonging to core categories have not risen as well. Our estimates point to core inflation falling to 8.6% y/y, the lowest since Apr. 2022. Food prices decreased by 0.4% m/m, again much stronger than the seasonal pattern would imply. Energy prices were influenced by regulatory factors and declined by 0.8% m/m (against our assumption of their stabilisation). Inflation was largely influenced by fuel prices, which decreased, despite the weakening of the Polish zloty and the increase in crude oil prices.
Unemployment rate in August was confirmed at 5.0%, the same as in July.
Household budget survey showed that in 2022 consumption smoothing occurred. The average monthly disposable income per person increased nominally by 11.4% (and fell by 2.6% in real terms), while average monthly expenses per person increased by 15.2% in nominal and 0.7% in real terms.
In 2024 NBP is going to keep the same set of monetary policy measures as those applied in 2023. NBP will still use the strategy of a medium-term inflation target of 2.5% +/-1pp. Interest rates will still serve as the main instrument of the monetary policy, while the NBP has not ruled out interventions on the FX market (just like in previous years).

THE WEEK AHEAD:

We expect the MPC to go on with interest rate cuts on Wednesday, but in much smaller step (25pbs) than in September.
PMI has likely remained subdued, but it stopped decelerating in September.

NUMBER OF THE WEEK:

-3.1 m/m – monthly decline of fuel prices, achieved despite costlier Brent and weaker PLN.