NBP puts hikes on hold despite rising inflation and FX woes in Poland

The National Bank of Poland (NBP) kept its policy rate unchanged at 6.75% yesterday, undershooting consensus and our expectation of a 25pbs move. The decision took place against the backdrop of another upward surprise in inflation, which picked up to 17.2% in September, as well as mounting pressure on the PLN, not least due to the hawkish shift of AE central banks.

What you will learn:

• But we think that yesterday’s call is more likely a pause rather than the end of the tightening cycle. For one, core inflation keeps creeping up as firms pass on higher costs to consumers. This is aided by still solid demand, supported by loose fiscal policy and elevated nominal wage growth at 12.7% in August. Hence, we expect the NBP to hike by a cumulative 50bps before year-end.