Poland Macro Weekly: Let the cycle begin!

Let the cycle begin! – The Polish MPC surprised with a large 75bps interest rate cut. In our view NBP rate cuts will be continued, but the overall size of rates reduction will be smaller than the market currently prices in.

According to the Polish Bureau of Credit Information (BIK), the demand for mortgage loans in August increased by almost 300% y/y. The surge is mainly driven by the subsidized lending program which started in July. The sharp cut of the NBP rates will now likely boost the demand outside the subsidized lending program as well.
Acc. to the MinLab estimate the registered unemployment rate in August remained at the historical low of 5.0%, as in June and July, in line with our and consensus view.
Commenting on the budget draft for 2024 (see PMW from Aug.25th) Moody’s stated, that the expected rise of public debt to 54% of GDP is credit negative. The agency expects that fiscal deficit will start to decline in 2025. It also stresses the traditionally conservative fiscal policy approach in Poland and the government’s awareness to keep spending under control.
The share of FX-denominated public debt (22% compared to the target set as below 25%) supports the flexibility in financing the borrowing needs – said M.Rzeczkowska, the Min. of Finance.

The detailed data on CPI inflation for August will likely confirm the flash reading at 10.1% y/y. The focus of attention will be core inflation, which may have fallen to below 10% y/y on tentative estimates.
There should be nothing new in the CAB data for July – Poland’s external balance looks impressive, with a monthly CAB surplus above EUR 1bn and approaching +1% of GDP (on 12-month rolling basis) at the end of 2023.

• 1.6% – the daily change of EURPLN in the reaction to the NBP interest rates cut, the strongest move since the Russian aggression on Ukraine.