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According to analysts, Adam Glapiński “verbally began the cycle of rate cuts”

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The President of the National Bank of Poland, Adam Glapiński, basically left no doubt at the Friday conference that the interest rate cut will take place in September by 25 basis points, economists of ING Bank Śląski estimate.

“In our opinion, the Friday conference of the NBP president leaves no doubt that the NBP has verbally started the cycle of rate cuts and the actual decision to cut rates will be made at the September meeting of the Council,” ING BSK commented after the Friday conference of the NBP president Adan Glapiński.

During Friday’s press conference, the President of the National Bank of Poland, Adam Glapiński, announced that the Monetary Policy Council has officially completed the interest rate increases. When asked whether it is possible to cut interest rates already in September, ie at the next MPC meeting (there is no MPC meeting in August), Adam Glapiński replied that it was possible if two conditions were met. READ MORE >>>

What needs to happen for NBP to lower interest rates?

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“The first is a fall inflation CPI below 10%, which we think will take place in August, and the data will be released in early September. The second condition is further certain fall of inflation to the target. We have a different opinion on medium-term inflation and less certainty than the NBP, but the assessment presented by the president leaves no doubt that he sees no significant threats.

Professor Glapiński basically left no doubt that interest rate cut will take place in September by 25bps and added that the next steps would be gradual. In our opinion, the second reduction will take place in October and the total interest rates will fall in 2023 by around 50-75bps.

Inflation – June 2023PAP

According to ING economists, further interest rate cuts will take place rather in 2024. They added that their short-term inflation forecasts are consistent with the NBP projections, but they see inflation threats after 2024. In their opinion, bringing inflation to the MPC target (i.e. 2.5 percent) +/- 1 percentage point) will be a long-term process, which is confirmed by the decline in core inflation in Poland, which is the slowest in the region.

Doubts about NBP president’s words about rising margins

“We also have doubts about the interpretation of the fact that inflation in 2022 is as high as 50-60% due to rising margins. We believe that the role of monetary policy is, among other things, to ‘cool down’ demand so that companies cannot easily pass on the cost shock The increase in real wages by 24% in recent years, mentioned many times by the NBP president, has side effects, i.e. the ease of transferring costs to prices and increasing margins, ING BSK stated in the commentary. The bank’s economists indicated that there will be a very significant increase in 2024 minimum wage (20.4% in nominal terms and around 15% in real terms). According to them, this means that there will be no barrier to demand for price increases. “Today, our models show a stabilization of core inflation in 2024-25 at a high level of 5 percent. In order to permanently reduce inflation in Poland, a paradigm shift in monetary policy is needed, i.e. less consumption and more investment in GDPwhich seems unrealistic today” – indicated in the commentary of ING BSK.

Main photo source: Rafał Guz/PAP

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