Economic Analysis

In today's Eyeopener

- Today the MPC decides on interest rates, while NBP governor is to deliver his speech
- Inflation in Hungary lower than expected, decline in industrial output
- USA-Israel-Iran ceasefire boosted market optimism
- CEE currencies gained markedly, and so did the debt market

After the Easter break, attention will once again turn to current issues, most notably the situation in the Middle East. Unfortunately, Donald Trump’s Thursday address to the nation failed to strengthen market confidence in a swift de-escalation of the conflict, so elevated sentiment volatility and a possible further rise in fuel prices should still be expected.
In the domestic calendar, the only event in the coming week is the meeting of the Monetary Policy Council. (...)

Polish MPC kept interest rates on hold, with the reference rate at 3.75%. The decision was quite obvious, given a recent spike in commodity prices that pushed CPI to 3% in March and raised uncertainty about the inflation and economic outlook. Plus, several MPC members, including the ones perceived as the most dovish, clearly suggested recently they were not going to change monetary policy anytime soon.

The official post-meeting statement pointed to significant uncertainty about the global economic outlook, repeated that next decisions will be driven by the upcoming information and emphasised that the outlook heavily depends on geopolitical situation and commodity market developments. (...)

This was supposed to be a very good year for the Polish economy, with GDP growth close to 4%, the peak of the investment cycle, resilient consumption and a strong labour market, inflation stabilising close to the NBP’s target, and slightly declining interest rates. We still see a chance that this scenario will materialise, although its success depends to a large extent on how persistent the disruption in commodity markets triggered by the US-Israeli attack on Iran proves to be. Since the beginning of the decade, the global economy has been fighting one battle after another, grappling with, among other things, the global pandemic, the energy crisis, rising geopolitical instability, a wave of economic protectionism, volatility in financial markets, and now a severe disruption in commodity markets. (...)