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The Warsaw Voice » Business » March 9, 2018
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Poland to hike rates no sooner than in 2019
March 9, 2018   
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The Polish Monetary Policy Council (MPC) is likely to hike interest rates no sooner than in 2019, major banks universally say following what they call a remarkably dovish stance expressed by MPC at the Wednesday conference. Following is a review of economists' comments from research reports prepared after the March MPC meeting.
Poland will hike interest rates "as late as in November 2019", ING BSK economists say in their commentary following an "unequivocally dovish" MPC conference. "We believe that the dovish stance of the Central Bank chair excludes chances for a 50 bps rate hike in 2019. . . . currently, we expect a 25 bps hike in November next year," they wrote, while adding that there is a chance for no rate hike in 2019. Polish rate setters will not only look at the domestic CPI level, but also at the disparity of interest rates versus European economies, ING BSK believes.
mBank analysts also expect a rate hike to happen in 2019 but don't point to a more specific date when this could happen if at all. mBank calls the Wednesday conference "one of the most dovish MPC conferences ever," given the current economic situation and forecasts on growth and inflation. "We continue to believe that interest rates will be raised in 2019. Of course, from today's perspective and given the current MPC rhetoric, it seems unlikely" although the inflation outlook remains uncertain: "We believe that it is too early to exclude the scenario of faster increases of the base inflation at this stage: the very relationship of services prices and labor costs is strong enough to bring the base inflation to 2% at the endof the year," they wrote.
According to BZ WBK economists Poland will likely start monetary tightening in mid of 2019. "After yesterday's conference of the council it seems that the moment of first rate hike is actually delayed. However, we believe that the monetary policy tightening cycle will be launched earlier than NBP chief suggests - probably in the middle of 2019 and the argument in favor of such a decision will be macroeconomic data (growing inflationary and wage pressure), as well as the initiation of rate hikes [cycle] by ECB."
Poland is expected to raise interest rates only once before the end of 2019, Nomura's economist Marcin Kujawski wrote in a note to markets, placing the 25 bps hike in July 2019. The Wednesday statement and conference "brought a strong confirmation of the policymakers' dovish tone," Kujawski wrote. "It looks as if the Council’s pain threshold in terms of consumer price growth is above the upper end of the NBP’s inflation target band (3.5%) and the MPC may tolerate target (2.5%) overshoot as long as inflation stays in the +/-1pp range."
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