NBP: Most Expect Governor To Stick With Hawkish Rhetoric During Presser (2/2)
Jan-17 10:19
- Credit Agricole said that the statement has become more hawkish. In their view, this supports the scenario of interest-rate stabilisation in the coming quarters, with the first cut expected in 3Q25.
- Goldman Sachs note that the statement appeared to echo the Governor's hawkish stance.
- ING write that the statement emphasised upside risks to the inflation outlook and signalled the need for restrictive monetary policy. They note that the hawkish December presser was at odds with the balanced statement from that month and is only consistent with the latest document. They expect the Governor to stick with a hawkish tone at today's presser and warn that the NBP may fall behind the curve with cutting rates. According to ING, the inflation outlook is more benign than seen by the NBP. Furthermore, the economy is showing symptoms of being constrained by restrictive monetary policy (weak credit flow and private investment, large propensity to save among consumers), which makes the current hawkish tilt controversial.
- mBank criticise noisy communications manifested in numerous minor changes to the statement. In their view, none of the additions to the statement provide new information, while the picture painted by incoming data has not changed drastically in the recent weeks. They point to the divergence between the NBP's view and economist consensus, but still expect the first rate cut to be delivered in March.
- Millennium Bank describe the statement as "not more dovish and perhaps slightly more hawkish than the previous one" and say that it supports expectations of interest-rate stabilisation in the coming months. The next MPC meeting will be held in just three weeks' time and no fresh inflation data will be released in the interim. They see room for 100bp worth of rate cuts in 2H25.
- Pekao expect today's presser to be hawkish in the wake of familiar revisions to the statement.
- PKO write that the tone of the statement signals an elevated risk of another hawkish press conference, despite below-forecast inflation data.
- Santander said that the statement was changed in line with Governor Glapinski's hawkish tilt. They interpret the document as a signal that the tone of today's presser will be similar to that from December.
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FOREX: Greenback Eyes Monthly Highs Ahead of Fed Decision
Dec-18 10:15
- The Fed decision later today marks the halfway point of the last full week for markets of 2024, at which the FOMC are expected to proceed with a further 25bps rate cut. The market is set to focus not on today's decision itself, but on the messaging and communication for the path of policy across 2025, via the policy statement, Powell's press conference and the dot plot.
- Ahead of the decision, the greenback is firmer, but only modestly so - with price action largely contained and recent ranges respected. The USD Index remains at the upper-end of the December range, making 107.19 the bull trigger, above which the USD eyes the best levels seen since the Presidential election at 108.071.
- Elsewhere, the EUR trades well, recovering a small part of recent weakness, aided higher by demand in the crosses: EUR/AUD has broken to a new monthly high and cleared resistance at the early November print of 1.6601. For now, 1.6648 is holding, but clearance of that mark will be the highest EUR/AUD print since August.
- GBP has slipped against most others as both core and services CPI came in modestly below expectations. As a result, markets have shrugged off the inline headline read, which should have little bearing on the thinking of the MPC.
- Outside of the Fed decision, US housing starts and building permits data are set to cross.
EUROPEAN INFLATION: EZ Final HICP Y/Y 4 Hundredths Below Flash
Dec-18 10:15
Eurozone November Final HICP was revised down a tenth from the rounded flash reading on an annual basis to 2.2%Y/Y from 2.3%Y/Y - unrounded this was a smaller -0.04 revision to 2.24% Y/Y (vs 2.28% flash, 2.00% prior). On a M/M basis, the rounded reading was unrevised at -0.3% M/M (unrounded -0.32% vs -0.28% flash, 0.34% in October) non-seasonally adjusted.
- Core inflation (ex energy, food, alcohol & tobacco) was revised 2 hundredths lower versus flash at 2.72% Y/Y (2.74% flash and 2.69% prior) and -0.57% M/M (vs -0.6% flash, 0.25% in October).
- The final reading reaffirms the stickiness seen in the flash services inflation print, with services contribution only marginally lower at 1.74ppts (vs 1.77ppts in October) and the Y/Y figure falling to 3.92% Y/Y from 3.95% in October.
- The pace of decline in energy prices was marginally more than the flash estimate at -2.0% Y/Y (vs -1.9% flash, -4.6% Oct) with the sequential November revised lower to 0.5% M/M (vs 0.6% flash). The contribution to HICP Y/Y was -0.19ppts in November - the highest since July.
- "Non-energy industrial goods" (i.e. core goods) contribution increased slightly to 0.17ppts (vs 0.13ppts in October) - also the highest since July, with the Y/Y print just rounding down below flash to 0.6%Y/Y (0.65% Y/Y unrounded vs 0.7% flash, 0.50% prior).
- "Unprocessed foods" contribution fell to 0.10ppts whilst, "Processed foods, alcohol and tobacco" contribution remained unchanged at 0.43ppts.
ECB: Lane: ECB Can Afford To Look Through Small Deviations From Target
Dec-18 10:09
Q: Once price stability has been restored, can Central Banks afford to look-through deviations from the target in either direction?
A: Lane: “Our 2% target is not a continuous target, it’s a medium-term target. That means we can look through short-term fluctuations”.
- The monetary policy reaction will depend on the size, persistence and origin of the deviation from target.
- “There is some value in having a stable interest rate policy all else equal”.
- If there is a deviation, we then need to assess second round effects and decide whether to respond or ignore. Lane stresses again that the 2% target is symmetric.
- In a previous response, Lane notes that he thinks the Eurozone is “quite far away” from a recession, based on current data.
