National Bank of Poland likely to hike interest rate by 25 bps by Q42018 - Commerzbank

The National Bank of Poland’s November meeting minutes show the usual calm, with the majority of MPC members maintaining that rates should be on hold for an extended period, noted Commerzbank in a research report. The Polish economy is solid and wages are rising; however, MPC doves feel comfortable that this will not translate to consumer inflation.

Polish consumer inflation is expected to average 2.3 percent in 2018 and above 2.7 percent in 2019. Such a projection would warrant at least some degree of monetary tightening by 2018 to minimize the inflation overshoot. The NBP is expected to hike interest rate by 25 basis points by the fourth quarter of 2018.

Even if the latest MOC minutes indicate that hawks do not have the required numbers yet, there was at least one member who seems ready to join the ranks of the hawks; this is based on his remarks after wage growth exceeded 7 percent in October.

“As a base-case, we do not see hawks gaining critical mass until H2 2018, but the case can become less clear cut if, for example, inflation were to suddenly move up a gear”, added Commerzbank.

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