The Polish central bank is set to meet this week for monetary policy decision. According to an Erste Group Research report, the Monetary Policy Committee is expected to keep the rate stable at 1.5 percent. The MPC might sustain its dovish rhetoric and will most likely repeat that the current inflation level is not worrisome.
Inflation growth decelerated in August, as the headline figure came at 2.8 percent on a year-on-year basis. Furthermore, price pressure is mostly being driven by non-core items and therefore continues to be out of the scope of monetary policy. Nevertheless, there appears to be upside risks to the inflation outlook stemming from energy and food prices development next year.
“All in all, low inflation in the external environment and the expected monetary easing to be announced on September 12 by the ECB will support the stability of rates in Poland. We expect that the MPC will keep rates at record low levels until the end of 2020 or beyond”, stated Erste Group Research.
Meanwhile, the flash inflation estimate for August is expected to be confirmed at 2.8 percent year-on-year. According to Erste Group Research, the headline inflation is expected to move within the upper bound of the target until year-end and might most likely peak at the end of the first quarter of 2020.
“Uncertainty regarding energy price development next year and the base effect could shift inflation above 3.5 percent in 1Q20”, added Erste Group Research.
