National Bank of Poland likely to stand pat on Wednesday

The National Bank of Poland’s Monetary Policy Council is likely to stand pat during its meeting tomorrow. According to a Societe Generale research note, the central bank is expected to keep the key rate on hold at 1.5 percent, and is also anticipated to maintain this level for the rest of 2016. The council would want to wait for the next inflation report update in November and is unlikely to make any changes to its monetary policy stance during the upcoming meeting.

During its September meeting, the Monetary Policy Council decided to keep rates on hold, consistent with consensus expectations. The council had reiterated its assessment that the “current level of interest rates is helpful to maintaining Poland’s economy on the sustainable growth path and maintaining macroeconomic balance”.

The Council projects stable GDP growth to underpin higher price growth. It believes that investment would be underpinned by a slow rise in EU funds absorption, good financial standing of enterprises and rising capacity utilization of companies. The Council continues to be quite positive regarding the investment outlook for the quarters ahead.

According to the Council, the drop in investment is momentary and reflects lower EU funds absorption after the expiry of the earlier EU financial framework. NBP governor Glapinski anticipates a rise in EU funds absorption beginning from the first half of 2017. This is possibly one of the most key arguments for keeping a wait-and-see strategy, noted Societe Generale.