NBP: On-Hold Decision Dictated By Elevated Inflation
Feb-06 14:18
NBP Governor Glapinski says that that the decision to keep rates on hold was dictated by the fact that inflation remains high. Although this largely stems from factors independent from the central bank, the NBP must act to prevent inflation from stabilising at elevated levels.
- Governor Glapinski lists familiar regulatory factors pushing CPI inflation higher. He says that ongoing economic recovery, high wage pressure and loose fiscal policy further increase the risk of the stabilisation of higher inflation.
- The Governor discusses the assumptions behind electricity price forecasts. Nothing new here - the central bank works with the current state of knowledge and avoids guesstimating future levels of electricity tariffs.
- Note that this is one of the reasons why the NBP's forecasts diverge from market consensus. The Governor admits that if electricity tariffs are lowered later this year, this will result in a downward revision to NBP forecasts.
- The NBP expects headline inflation to be close to +5% Y/Y in 1H25. Core inflation is expected to stay close to +4% Y/Y through the rest of this year.
- A chart displayed by the Gopvernor suggests that headline inflation is expected to peak at +5.3% Y/Y in 1Q25, then ease off to +4.1% Y/Y in 3Q25 and rebound to +4.8% Y/Y in 4Q25.
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EQUITIES: EU Tech Index is extending gains
Jan-07 14:09
- The upside continuation in US Equities, these are small slow moves, help the European Tech sector {SX8P Index} back towards it earlier intraday high.
- The initial rally in Tech stocks started Yesterday after Microsoft said that it planned to spend $80bn on AI centers this Year.
- SX8P is breaking above 850.00, the highest traded level since late July, and next resistance is seen further out, up to 864.89.
EUROPEAN INFLATION: GS See Core CPI M/M Higher Than ECB Estimate
Jan-07 14:07
- We wrote earlier how Eurozone service CPI inflation momentum continued to cool in December despite the monthly pace increasing to 0.34% M/M, but also how there have been concerns in recent months about whether the seasonal adjustment process is biasing this lower.
- On that subject, Goldman Sachs write that they estimate sequential core inflation at a seasonally adjusted 0.33% M/M in December, “notably stronger than the ECB's estimate of 0.21%mom and higher than the November reading of 0.02%mom, driven by an acceleration in sequential services.”
- “We update our Euro area inflation path, and still expect core inflation to reach target sustainably by the end of 2025. As for headline inflation, we now see it slightly above target for the entirety of 2025.”
STIR: Effective Fed Funds Rate
Jan-07 14:03
FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $98B
- Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $280B
