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bne October 2023 Companies & Markets I 19
“This was reflected in the depreciation of the złoty ... which, of course, is not helpful in achieving the inflation target,” it added.
In contrast to the expected market reaction, the NBP said in its communiqué that a stronger zloty would be instrumental in lowering the inflation rate.
The NBP’s decision also comes in a clear political context.
The governor of the central bank, Adam Glapinski, has been a longtime associate of the ruling Law and Justice (PiS) party.
PiS is engaged in a bitter election fight against the opposition ahead of a general election due on October 15. The radical cut
now sets the scene for lowering mortgage repayments in the coming months and could push forward economic recovery.
While those effects will not materialise before the election, the decision by the NBP gives the government grounds to up the rhetoric on the economy in the crucial weeks of the campaign.
Governor Glapinski is expected to deliver more context on the decision during a press conference on September 7.
However, some analysts say that the surprise move has stripped Glapinski and the NBP of credibility and predictability.
“Forecasting future actions [by the NBP] is subject to significant uncertainty,” Bank Millennium wrote.
Russia’ CBR ups key rate to 13%, warns
of long-term tough policy
bne IntelliNews
The board of the Central Bank of Russia (CBR) at the September 15 policy meeting resolved to increase the key rate from 12% to 13%, following the emergency hike by 350 basis points in August amid ruble weakening.
The CBR maintains that “inflationary pressures in the Russian economy remains high”, noting in the accompanying press release that most significant pro-inflationary risks came from the growth of domestic demand outstripping the possibilities of output expansion (economy overheating CBR warned about previously) and the weakening of the ruble in the summer months.
The regulator thus believes that “under these conditions, additional tightening of monetary conditions is required to limit the scale of inflation deviation upwards from the target and its return to 4% in 2024.”
The CBR also worsened its inflation forecast for this year: earlier the regulator expected it to be 5%-6.5%, but upped the guidance for 2023 inflation to 6%-7%.
Further monetary tightening was expected by the market and 20 out of 30 economists surveyed by RBC business portal expected the CBR to keep increasing the key interest rate (16 expected a hike of 100bp). The CBR officials also guided for a rate increase ahead of the September 15 meeting.
Inflation as of September 11 increased to 5.5% year on year after 4.3% in July and 5.2% in August, the CBR estimates. The inflation expectations of the population are also growing: at the end of August they increased from 11.1% to 11.5%.
The analysts surveyed by RBC believe that the CBR could hike the rate again by the end of 2023, which is also in line with the statements of the CBR’s Governor Elvira Nabiullina.
At the press conference of September 15 she said that under current conditions, a long period of tight monetary policy is needed to return to the inflation target of 4% by the end of 2024, as cited by Kommersant daily.
According to Nabiullina, the credit market has not yet adjusted to the previous rate hikes and the banks continue
“Under these conditions, additional tightening of monetary conditions is required to limit the scale of inflation deviation upwards from the target and its return to 4% in 2024”
to issue loans on previously approved applications. She also welcomed the recent tightening of the subsidised mortgage loan programme.
Coupled with the “very hawkish signal in its communication” the CBR also increased the average key rate forecast for 2024 (from 8.5-9.5% to 11.5-12.5%), Renaissance Capital wrote, while noting that in real terms, the key rate will in the coming months be at its highest level since 2013.
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