Polish central bank likely to keep interest rate on hold in June

Polish central bank, the National Bank of Poland, is set to meet this week for its monetary policy meeting. According to Erste Group Research, the MPC is expected to leave the policy rate on hold at 1.5 percent. The recent CPI reading for May at 1.7 percent year-on-year surprised the market to the downside, as the market expected inflation rising to 1.9 percent year-on-year.

Further, low core inflation at 0.6 percent year-on-year affirms little demand pressure. Although inflation is observed to have slightly increased in the last two months, such readings are neutral for the MPC stance.

First, the rise in driven by non-core items; second, the inflation rate continues to be well below the target. In the months ahead, CPI is expected to have increased further to about 2 percent year-on-year and drop towards the end of the year.

“All in all, the MPC should maintain its dovish stance and the probability of monetary tightening in 2019 remains low, in our view”, added Erste Group Research.

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