Polish National Bank unlikely to hike rates in 2018 and 2019

Polish National Bank is expected to keep the interest rates stable this year and next year because of limited inflationary pressure, noted Erste Group Research. Since the start of 2018, inflation has continued to be well below the target rate. The headline figure is expected to move towards 2 percent in the months ahead and decrease at year-end due to statistical effects and the high base from last year.

The strong growth of wages has not yet translated into demand pressure in the economy and core inflation continues to be stable at levels below 1 percent. According to Erste Group Research, inflation is expected to be stable and below the target rate of the central bank, averaging 1.7 percent year-on-year in 2018 and 2.2 percent next year.

Limited inflationary pressure underpins the dovish stance of the MPC: given recent market developments, including the situation on core markets, the MPC sees a stability of rate scenario as the most likely this and next year.

“Depreciation of the zloty vs. all main currencies from the beginning of the year additionally limits inflationary pressures. We keep our forecast for a stable policy rate in 2019 unchanged”, added Erste Group Research.

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