Poland: NBP surprises markets with a 100bps hike

The National Bank of Poland (NBP) hiked the policy rate by 100bps at yesterday’s meeting, bringing it to 4.5%. The move exceeded both our and consensus expectations of a 50bps hike, but it looks warranted in the face of a growing inflationary pressures, more evidence of a wage-price spiral and increasing risk of medium-term inflation expectations un-anchoring.

What you will learn:

• NBP finds itself in an increasingly challenging environment. For one, it faces a stagflationary shock coming from the Russian invasion of Ukraine, which, primarily through its impact on energy commodity and food prices, has already boosted inflation to 10.9% in March, the first double-digit reading since 2000.
• As a corollary, growth momentum will come under growing pressure, as inflation curbs purchasing power and elevated uncertainty hinders investment.
• Importantly, the domestic inflationary drivers are at least equally important as the external factors, and are becoming a growing cause for concern.