Polish Zloty: Slow NBP hawkish shift weighs on PLN - Commerzbank

Commerzbank’s Tatha Ghose reports that Polish headline and core inflation have re-accelerated, with seasonally adjusted monthly rates now clearly above target. This makes earlier signals from National Bank of Poland (NBP) Governor Adam Glapinski about possible rate cuts obsolete. However, because the central bank is turning hawkish more slowly than inflation is rising, the development is seen as negative for the Polish Zloty (PLN).

Re-accelerating prices challenge NBP guidance

"Polish CPI inflation was confirmed accelerating to 3.0%y/y in July from 2.5%y/y in June, matching the original consensus. The acceleration was overwhelmingly fuel-driven: passenger fuel prices jumped by 13.9%m/m, taking the annual fuel inflation rate to 15.8%y/y from 5.3%y/y in June. Core inflation also moved in the wrong direction. "

"Poland’s Central Bank (NBP) reported that its main core indicator, excluding food, drinks, fuel and energy, accelerated to 3.1%y/y in July from 3.0%y/y in June. The 15% trimmed mean held at 2.8%y/y, but other core measures accelerated, with the index excluding regulated prices accelerating to 2.8%y/y and the index excluding the most volatile prices to 3.4%y/y."

"As usual, this year-on-year summary is not our main point: the more relevant seasonally-adjusted month-on-month rates of increase have re-accelerated sharply during June and July and are now clearly above-target. This means that NBP governor Adam Glapinski’s earlier indication that rate cuts may soon follow should now be treated as obsolete."

"The development is negative for the zloty because inflation is accelerating faster than NBP is turning hawkish; NBP will at best signal unchanged rates for longer, which may not satisfy the FX market."