Poland: NBP to keep its policy rate on hold at 1.5% - TDS

Analysts at TDS and the unanimous consensus expect the NBP to keep its policy rate on hold at 1.5% today; it has been at this level since March 2015.

Key Quotes

“All in all the MPC is pretty happy with the way things are going. The economy is growing strongly with Q1 GDP growth of 4.0% Y/Y. Headline inflation, after a    run-up around the start of this year, has eased back to 1.5% Y/Y, well below the 2.5% target.”

“Any concerns that the MPC might have about the relatively fast pace of wage growth are eased by the fact that unit labour costs are growing at only a modest pace. On the principle of “if it ain’t broke, don’t fix it” the MPC expects to keep the policy rate on hold for some considerable time; Governor Glapinski has suggested even until end-2018. While the PLN FRA curve is implying that we will have to wait to the end of 2018 to get just 25bps of hikes, we think that the NBP could start hiking early next year as continued strong growth starts pushing up inflation.”