National Bank of Poland likely to keep key rate unchanged at 1.5 pct this year

The National Bank of Poland’s Monetary Policy Council is expected to stand pat during its meeting tomorrow, according to a Societe Generale research report. The MPC is expected to maintain the key interest rate at 1.5 percent tomorrow and is likely to keep the rate at this level for the rest of 2016.  The MPC is anticipated to concentrate on the new inflation report update.

Amongst the council members, there is a clear consensus that the scenario of a rate cut is not realistic, noted Societe Generale. The central bank governor Adam Glapinski has already begun preparing the market for a possible rate hikes in 2018.

Limited acceleration of the economic growth in the third quarter might result in additional cautious market expectations on possible rate hikes in 2017 and on monetary policy. The committee might still be very conservative in spite of expected price growth. The council might revise up the CPI forecast because of unchanged VAT rates in 2017. Moreover, slightly increased fuel prices and likely changes in regulated prices might result in a slightly higher inflation projection, stated Societe Generale.

At present, a rise in the key interest rate next year appears quite unlikely because of the limited potential for acceleration in Polish economic activity in quarters ahead, added Societe Generale.

“The latest GDP data are slightly below the NBP’s July projection. We think that this could prompt a downward revision to the GDP projection, at least for 2017”, said Societe Generale.