Poland Macro Weekly: Too much uncertainty to go down with the NBP rates

TOP MACRO THEME(S):

It’s too cold to unfreeze the rates – The MPC kept interest rates unchanged, in line with the expectations. A permanent return of inflation to the target within the projection horizon does not seem sufficient for rate cuts to take place soon.

WHAT ELSE CAUGHT OUR EYE:

The Moody's rating agency assessed that the release of EUR 137 bn of the EU funds for Poland is positive for the country's credit profile. Moody's rates Poland's creditworthiness at "A2" while Fitch and S&P at "A-" with a stable outlook for all ratings. We do not believe that the ratings will change in the near future. The agency's next rating update is scheduled for March 22.
Prime minister Tusk did not rule out the return of the higher 5% VAT rate on food from April. It would increase inflation by 0.9-1.0 pp, which – so far – we have assumed would take place from July 1. With regard to electricity tariffs for households, media agencies report that those announced for 2024 could be adjusted and reduced from PLN 739 to approximately PLN 500-600. In this case the increase in energy bill would be between 12-24% against 41% if the prices were unfrozen to the current tariff level.
The government decided to extend loan holidays for borrowers who found themselves in the most difficult situations. Loan holidays will be available if the installment exceeds 30% of household income, calculated as the average for the previous three months, or if the borrower has at least three children to support. According to the Polish Bank Association, the cost of extending the holidays will equal to PLN 3.7 bn (assuming a level of participation similar to that in the previous program).

THE WEEK AHEAD:

Together with February inflation, Statistics Poland will publish updated CPI basket weights, which we expect could reduce January inflation (3.9% y/y) by 0.1 pp. We estimate February reading at 3.3%. January should bring a current account surplus resulting in further improvement of the external balance.

NUMBER OF THE WEEK:

-1.8% – monthly decline in the average value of requested mortgage loan in January, after December was boosted by the termination of Safe Credit program.