Poland’s recent inflation data had been entirely dovish, and that the hawkish stance being maintained by NBP governor Adam Glapinski (and his faction within the MPC) – allegedly based on some concern about possible inflation pressure in future – had no fundamental basis, Commerzbank’s FX analyst Tatha Ghose notes.

Glapinski faces parliamentary pressure

“Inflation spiked briefly when erstwhile anti-inflation policies, such as reduced VAT on food, were discontinued. We see little chance of this factor producing a long-lived burst of inflation. This is why we labelled Glapinski’s stance blatantly political. As a follow-up, yesterday’s flash CPI reading for September supports our view on Polish inflation. Media headlines emphasize that inflation had accelerated from 4.3%y/y to 4.9%y/y. But in contrast with what the media suggested, this does not showcase pro-inflation risks. Nothing could be further from the truth.”

“The year-on-year rate of change is misleading. The recent momentum of prices – represented by the month-on-month change of seasonally-adjusted price level – recorded a within-target 0.1%m/m. This rate of change had, indeed, spiked to nearly 2%m/m immediately after the VAT rate increased, but that impulse has since faded. The broader pattern of Polish inflation falls near the dovish end of the regional peer spectrum.”

“Hence, it does not make sense that the Polish central bank will be cutting rates a year after peer central banks have done so. In our view, this artificial hawkish monetary stance should not be supporting the zloty’s valuation as it represents the failure, the politicisation of monetary policy. The monetary stance could flip towards dovish in coming months as Glapinski faces parliamentary pressure to explain himself. This is a source of risk for the currency.”