Polish central bank holds fire, sends a moderately hawkish message

Poland's central bank kept interest rates on hold and sent a moderately hawkish message at its first meeting under new governor Adam Glapinski. He said Britain's exit would not affect the Polish economy significantly, and that the bank was unlikely to change its interest rates.

"One should not improve too much in order not to worsen," Glapinski said, adding there was no indication that the bank would change rates anytime soon. "Our lack of action is well-considered and is the most sophisticated form of movement."

The central bank however, unexpectedly, revised its forecasts which will be announced as a part of its second quarter Inflation Report. This report will be published on Monday, and will feature a sharp -0.55 percentage points revision to the 2016 GDP growth forecast from 3.75 percent to 3.2 percent; 2017 is being revised lower from 3.7 percent to 3.45 percent. The inflation forecast for 2016 has been lowered to -0.6 percent from -0.35 percent, while 2017 is forecast at a below-target 1.25 percent.

"The first MPC meeting under the new Chair had a moderately hawkish tone. MPC members seemed more focused on growth than low inflation and seem to doubt the effectiveness of lower rates," said Nordea analysts in a note.

New NBP Governor, Adam Glapinski, tried to sound upbeat saying that he personally still expects 3.6 percent growth this year, but conceded that most MPC colleagues had lowered their projections in light of uncertainties, such as Brexit.

"We hold a sub-consensus 3.1 percent growth forecast for 2016 ourselves. Based on this assumption, we expect NBP to cut rates again before the end of the year. We see significant volatility in EUR-PLN over the coming quarters around a central 4.45 level," Commerzbank notes in a report.