At the beginning of the week, the zloty encountered difficulties in strengthening further after comments from the president of the National Bank of Poland, Adam Glapiński. Economists estimate that this week’s defense of the PLN / EUR 4.51 level may be difficult.
On Monday morning the zloty lost against the main currencies. Around At 11.00 one euro cost 4.51 zlotys, and the dollar had to be paid – 3.81 zlotys.
“The zloty, which made the last days very successful already at the start of the new week, faces difficulties in further appreciation. The source of caution is the statements of the president of the National Bank of Poland, in which recall – among others made at the beginning of this year – statements about the unfavorable appreciation of the zloty for the economy “- Bank Millennium economists pointed out in Monday’s report.
Adam Glapiński on inflation
In an interview given to PAP Biznes, the NBP president Adam Glapiński said, inter alia, that the NBP will not allow high inflation to persist and that if certain premises arise, it is ready to withdraw monetary accommodation. But for now, given the nature of the inflation shocks and the pandemic uncertainty, it would be very risky.
– From our point of view, the most important thing is how the economic situation will develop next year, what will be the labor market and how it will affect inflation processes. If the economic conditions remain very good, the situation in the labor market remains favorable, and inflation exceeds the NBP’s inflation target, then it will be justified to withdraw the monetary adjustment. For now, taking into account the nature of the shocks boosting inflation and, at the same time, the very high uncertainty about the future of the pandemic and the economic situation, it would be very risky to tighten the monetary policy, Glapiński said.
Millennium experts indicated that this week, due to the meeting of the Monetary Policy Council (Wednesday) and the likely conference of the NBP governor (probably on Friday), was supposed to shed more light on the prospects of monetary policy after the recent reading of higher than expected inflation.
“The comments of Adam Glapiński, published today, quite restrained on the subject of monetary policy normalization, next to the proximity of the technical barrier in EUR / PLN (4.50), should clearly limit the pressure on the strengthening of the Polish currency in the coming days” – they added.
In their opinion, the domestic events will be supplemented by a meeting of the European Central Bank, where hawkish voices are scarce, and speeches by representatives of the US Federal Reserve (focused mainly on Thursday). On the other hand, the calendar of macroeconomic publications from around the world is poor.
“To sum up, we believe that the EUR / PLN exchange rate will defend the vicinity of 4.51 this week, which may be difficult given the still mild tone of the MPC representatives,” added Millennium economists.
Also, the economists of Alior Bank noted that the NBP governor in Monday’s interview defends the accommodative attitude of the MPC to monetary policy.
“Still claims that its impact on the observed strong increases in inflation is of little importance, as price increases result mainly from supply factors (raw materials, energy, food) or administrative factors (energy, waste disposal). With this approach, the MPC still has time to slow down inflation, and the right timing is the moment when demand factors will play a key role in the price pressure, “wrote the report.
“There are also many references to J. Powell from the Fed and his opinion on the temporary nature of inflation in Glapiński’s statement. Thus, the NBP governor reminded him that in his opinion the Polish monetary policy of the NBP should focus on the main central banks, and not on those in the region. (like CNB or MNB). Of course, the argument of the risks related to the next wave of Covid-19 infections in the country was also reiterated, “they added.
Interest rate hike this year
They interpret the statement as a signal that the NBP governor is still presenting a dovish attitude to monetary policy and is a skeptic as to the endogenous nature of inflation processes.
“Nevertheless, he certainly does not rule out a rate hike this year, if the conditions set by him are met (including clear premises from the November NBP projection). The interview partially reduces the temperature before this weekly MPC meeting and may postpone expectations for possible rate hikes at the beginning of next year, but not completely. after the meeting “- commented experts from Alior.
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