Economic Analysis

In today's Eyeopener

- Today March US CPI inflation, January services output in the euro zone and Poland
- MPC left interest rates unchanged, in line with expectations
- Adam Glapiński: inflation to go up, GDP to slow down, though not as sharply as in 2022
- Zloty slightly weaker, market rates and bond yields increased

The coming week will be relatively light in terms of economic data releases. Global markets’ attention will be focused on how negotiations on ending the war with Iran are progressing, but just after the weekend the number one topic will most likely be the outcome of the elections in Hungary. Opinion polls have for many weeks pointed to a growing lead of the opposition TISZA party, but the outcome is not a foregone conclusion, as the ruling Fidesz party can count on a number of electoral system regulations working in its favour and possibly also on a late-stage mobilisation of its electorate.

In Poland, balance of payments data for February will be released on Monday, followed on Wednesday by final March CPI inflation data. On Thursday, core inflation figures will be published along with the annual revision of quarterly GDP data for the past two years. (...)

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. (...)

In mid‑March we published a report outlining three scenarios for the development of the economic outlook, depending on how prolonged and severe the commodity shock triggered by the war in Iran would prove to be. Three weeks later, we can conclude that the first scenario, which we had then considered the most likely, turned out to be overly optimistic, and the baseline scenario is shifting towards scenario number two: the conflict does not escalate further, but prolonged uncertainty and the damage already inflicted on infrastructure mean that commodity prices may remain at least 15–20% above their February levels for most of this year. Recent reports about an agreement on a two‑week ceasefire are interpreted by us as a clear signal that neither the US nor Iran is interested in further escalation or a prolongation of the war. (…)