NBP expected to keep its key rate unchanged

At the recent MPC meeting, NBP kept its key rate unchanged. NBP cited that although deflationary pressures persist, they are subsiding. NBP is expected to keep its key rate unchanged in the short-term on the back of improving inflation, EUR/PLN staying above 4.00, and zloty volatility, foresees RBC Capital Markets.

Headline inflation has continued to rise in July, reaching -0.7% y/y. Based on seasonality, the inflation rate is expected to enter positive territory going into November. Meanwhile, EUR/PLN has continued to trend higher in August, at 4.22 as of writing. In the short-term, zloty volatility may rise with elections on Oct. 25 as discussions about various bill proposals increase, suspects RBC Capital Markets.