While the koruna and the forint posted only minor losses on Friday, the Polish zloty hit a two-month low after the release of industrial production and construction figures for December. Industrial production fell by 10.6% Y/Y while construction and assembly production shrunk by 24.8% Y/Y. Athough both numbers were biased due to the different number of working days, even after the adjustment, industrial production fell by 5.1% Y/Y, i.e. the most since June 2009.
Both figures surprised on the downside of expectations and thus triggered bets on additional monetary policy easing. Let us recall that the central bank (NBP)
indicated that after possible 25bps rate cut in February it would put further cuts on hold and analyze impacts of lower interest rates on the economy.
In light of the recent figures, February’s rate cut seems to be a certain thing. Even Adam Glapinski, a hawkish member of the Monetary Policy Council (MPC), said
today he would support the cut. Further steps of the MPC remain, however less certain. At its March meeting, the MPC will have the new inflation report at its disposal. In our view, it might point to a modest recovery around in the Q2/2013 and Q3/2013. On the other hand, the MPC will have also the fresh estimates of GDP growth for the fourth quarter of 2012 which may fall even below 1% Y/Y.