Poland MPC less confident on inflation rebounding even in the medium-term

Poland's central bank at Wednesday's MPC meeting kept monetary policy unchanged. The benchmark rate was kept on hold at a record low 1.5 per cent for the 13th consecutive month. The decision was in line with economists' expectations. Previously, the bank lowered the rate by 50 basis points in March last year. The economist expects the policy rate to stay unchanged at 1.5 percent both this year and next.

At the statement that followed, the MPC reiterated on various occasions that the economy remains solid, that consumption growth has upside, and that job growth has been satisfactory, it removed a key phrase about "expectation of gradual acceleration of base inflation" from the statement, which suggests that the CB has become less confident on inflation rebounding even in the medium-term.

In January Standard & Poor’s slapped Poland with its first ever downgrade, while earlier this week Moody’s warned that the country’s current constitutional crisis is potentially damaging to its credit rating.

"We, however, view such remarks within the general principle that NBP cannot really tell us that it will act, until it is ready to act. We still foresee rates being cut by 50bp in Q3." said Commerzbank in a research.