National Bank of Poland unlikely to hike rates in 2018

The Polish zloty softened markedly against peers yesterday, after the NBP downwardly revised inflation projections during its MPC meeting, even while revising growth projections stronger. The MPC kept the key interest rate on hold as was widely anticipated; however, its new macroeconomic projections had a dovish ring to them.

The central bank stated that the MPC observed that “Despite the acceleration in economic growth, annual consumer price growth continues to run at a moderate level. At the same time – although wage growth increased – inflation net of food and energy prices remains low”.

National Bank of Poland’s focus on this divergence as a rationale for lower CPI projections makes its less likely that the central bank will hike rates in 2018, particularly because this divergence is still a source of mystery for NBP, stated Commerzbank in a research report.

“Our own calculations suggest that Polish inflation will accelerate somewhat because of base-effects over the coming quarter; furthermore, we note that recent readings of 7 percent-plus wage growth has only recently begun to attract serious attention. We would, therefore, not rule out a hike this year altogether, but on balance the likelihood is falling for sure”, added Commerzbank.

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