National Bank of Poland likely to stand pat today

The National Bank of Poland is set to meet later today for rate decision. According to a Commerzbank research report, the central bank is expected to keep the monetary policy unchanged. Today’s meeting would have been more interesting if yesterday’s euro area core inflation data had not surprised to the downside. In Hungary, a tame inflation trend had abruptly reversed and accelerated to above CB target, creating issues for the central bank there.

“We think any further confirmation of accelerating inflation in euro zone would begin to exert pressure on remaining central banks such as NBP, which would have to change its assessment and move to a more neutral stance”, said Commerzbank.

If the central bank did not do this, then the exchange rate might be affected. However, all this is moot now: yesterday’s euro area inflation data indicated that inflation in the region is not accelerating.

“With euro zone core inflation stuck at 0.8%y/y after all these years of zero interest rate, we cannot imagine that the Polish central bank will face any pressure to turn hawkish now. The balance of power will shift clearly in favour of the doves, who prefer to keep interest rates unchanged to 2022. If an ultra-dovish monetary stance is adequately backed by inflation data, then this will not be a problem for the currency”, added Commerzbank.