National Bank Meetings and Economic Outlook in Poland, Czech Republic, and Hungary

In a recent meeting, the National Bank of Poland reaffirmed earlier statements indicating that the Monetary Policy Council (MPC) is not rushing to implement new measures. Governor Adam Glapinski pointed out that the current economic landscape in Poland differs from the years 2019 to 2022, highlighting that the central bank isn’t grappling with the same inflation challenges as before. He acknowledged that an energy shock could push inflation up while also hindering GDP growth, yet he insisted there’s no urgent need to raise interest rates at this time. That said, he mentioned that the bank would act swiftly if required. As it stands, the expectation is for no changes to interest rates, which is seen as a long-term approach. Interestingly, market trends still indicate a potential rate hike within the next year, though further inflation figures and stabilization in the geopolitical climate will be crucial before any changes occur.

Meanwhile, the Czech National Bank shared its insights this week. In an interview, board member Jakub Seidler expressed confidence in the bank’s current standing, attributing it to the relatively restrictive monetary policy adopted prior to the recent Middle East conflict. This stance has positioned the bank well to manage inflationary pressures. Following Tuesday’s announcement of lower-than-expected inflation for March at 1.9% year-on-year, it seems likely that the CNB will maintain its current interest rates. Nonetheless, the market is pricing in nearly two rate hikes within a year, which is the highest expectation in the Central and Eastern European region. This anticipation appears influenced by the hawkish stance of the European Central Bank and the expectation that the CNB might follow similar trends.

Turning to Hungary, as the nation gears up for elections this Sunday, the performance of the forint seems somewhat detached from broader regional trends and geopolitical events. Leading up to the elections, both the euro/forint exchange rate and bond yields have seen significant drops, with the market forecasting about two interest rate hikes in the coming year. This week, the Hungarian National Bank has refrained from making any statements, yet the trajectory of future monetary policy seems to hinge largely on the election results and subsequent market reactions. For now, we expect interest rates to remain steady. However, the landscape could shift quickly depending on how post-election fiscal policies develop, the availability of EU funds, and fluctuations in the EUR/HUF exchange rate. Polls indicate a tight race, but they lean towards a potential win for the opposition.