Glabinski Advisor: Inflation is falling faster than we expected

Grazyna Ancibarowicz, advisor to the head of the Polish National Bank, referred to Tuesday’s inflation reading in an interview with ISBnews. The data provided by the Central Bureau of Statistics, which states that inflation fell to 6.5% in October, is considered positive.

“Firstly, Inflation is falling faster than we expected; Secondly, the forecasts of the National Bank of Poland were once again shown to be accurate.”

The preliminary inflation reading in October confirms the validity of the decisions taken in September and early October regarding reducing interest rates. There is no reason to keep interest rates too high and stifle the economy In a situation where we have a clear tendency for a rapid decline in inflation and its approach to the target – says Grażyna Ancyparowicz.

In her opinion, price increases have been halted and “prices have fallen in many areas, which is good for those households where the share of spending on food and housing costs is relatively high.”

She also stressed that at the end of the year inflation may be in line with the expectations of the head of the Polish National Bank. He added: “I think what the president said will come true, and perhaps it will be a little better.” […] “If nothing extraordinary happens, inflation will actually continue to decline,” she said, noting that Adam Glabinski expects inflation at the end of the year to reach 6-7 percent.

She stressed that the November inflation forecast issued by the National Bank of Poland will be important for further steps taken by the Monetary Policy Board regarding interest rates. According to many experts, the Monetary Policy Board will cut interest rates again in November. Analysts’ expectations converge and indicate a value of 25 basis points. Bankers also stress the difficulty of predicting the board’s subsequent decisions.

The Money.pl website reviewed analyzes of the largest Polish banks regarding what may happen with inflation in the coming months. The opinions of many experts echo the same view: the fall in inflation in October was the last significant decline this year. This opinion was expressed, among others, by: Santander Bank and ING Śląski Bank.

ING experts emphasize the apparent discrepancy in inflation data. The decrease on an annual and monthly basis relates to fuel only. These decreased by 14.4 percent. Year over year by approximately 4%. From month to month. Food prices rose monthly by 0.4%, and energy prices by 0.2%. “Price momentum has returned to geometric pre-inflation levels. Despite deflationary pressure in commodity PPI, we hold +0.5% m/m (about 6% y/y after annual analysis). It looks very sticky. The bank’s analysts wrote that recovery is ahead.

There are also expectations about interest rates. Goldman Sachs has emphasized this before elections The Monetary Policy Board reduced it by a total of 100 basis points. “We expect the National Reserve to become more dovish,” the analysts wrote. In their view, interest rate cuts may continue next year. “Looking ahead, until 2024, this will be with a stable decline in inflation The National Bank of Poland is expected to cut interest rates significantly” – analysts summarized.

Inflation at the end of the year may be in line with the expectations of the head of the Polish National Bank, but this does not mean that it will be very low. The International Monetary Fund also published inflation forecasts three weeks ago. The MWF assumes that average annual inflation will be quite constant – It will reach 6.4% in 2024. This is one of the worst results in Europe The situation will be worse only in Hungary, where the expected inflation rate is 6.6%. A lower index will be achieved, among others, by: Moldova (5.0%), Bosnia and Herzegovina (3.0%), Romania (5.8%), Serbia (5.1%).

Reaching the inflation target will be more difficult. MWF estimates that this will not happen in Poland until 2028.

Ludwik Kotecki, a member of the Monetary Policy Committee, is not optimistic. In his opinion, it will be possible to reach the inflation target later than the Polish National Bank predicted in July – not in 2025, but in 2026. The latest forecasts of the Central Bank in this regard will be available in November.

Pekau also writes about expectations. “When it comes to 2024, forecasters are more clearly divided into two camps. The first assumes a continued decline in inflation and expects inflation to average around 5% next year, citing, among other things, the EU’s (deflationary) role.” “Context, lower food prices and fading secondary effects in core inflation. The second camp sees current inflation levels as close to the domestic low and creating a low base for next year,” the analysts write.

They concluded: “Depending on the assumptions regarding the development of regulated prices, inflation is expected to recover to 7-8% on an annual basis in the second half of next year. We join the first group.”