Poland: No change in rates, low risk of spill over - ING

Jakub Rybacki, Economist at ING, notes that the Poland's central bank left interest rate unchanged at 1.5% in line with broad consensus expectations.

Key Quotes

“The shift in policy stance during the press conference is unlikely. We expect Governor Adam Glapiński to reiterate his forward guidance, that rates should remain flat till the end of 2020.”

“The press conference is likely to be dominated by questions about the risk of spill-overs from the emerging market crisis, e.g. Turkey, Argentina or the Asian economies. Given that, economic ties with these countries are limited; we think the MPC is likely to emphasise it should be low risk.”

“The strong argument supporting the current policy stance is moderation of GDP growth. We expect deceleration from 5.1% year on year in 1H18 to 4.4%YoY in the second half of the year and 3.7%YoY in 2019.”

“The surprising drop in investment dynamics in 2Q18 from 8.1 to 4.5%YoY is also concerning, even though the change of accounting rules explain some of it particularly with regards to military spending.”

“Secondly, the MPC should take into account the risk of undershooting the CPI target in 4Q18. We expect a drop in inflation to be approximately around 1.0%YoY in November reflecting low core inflation and deceleration of food and fuel prices’ dynamics.”

“Still, the MPC should claim that inflation remains under control and risk of overshooting the Bank's target in 2019 are limited.”

“We expect the MPC to maintain flat rates till the end of 2020.”