Poland’s lack of urgency to raise interest rates is becoming less out of step with global central banks as plans to tighten monetary policy get sidetracked around the world.
Maintaining the rate differential with major economies won’t be a challenge any time soon for Governor Adam Glapinski as he looks to extend Poland’s longest-ever policy pause at least through next year. While Polish inflation rebounded more than forecast last month and the zloty depreciates, the Monetary Policy Council will keep its benchmark at a record-low 1.5 percent, according to all 28 economists surveyed by Bloomberg.
Already facing little domestic pressure to pull off the country’s first rate hike since 2012, the National Bank of Poland faces an easier path now that policy makers from Japan to Sweden are choosing to stick with easy monetary policy. In the neighbouring euro area, the main destination for Poland’s exports, the European Central Bank last month avoided any discussion of its next steps towards ending bond buying amid signs that the bloc’s economic growth is faltering.
“As the Polish MPC strongly observes interest-rate parity, the recent slowing in economic expansion in the euro zone,” alongside a deceleration in price growth, “should both keep the ECB dovish and support the cautious MPC view on rates,” PKO Bank Polski SA economists led by Joanna Bachert said in a report.
Poland’s economy has for now been resilient to the slowdown elsewhere in Europe. Gross domestic product expanded faster than forecast last quarter, growing 5.1 percent from a year earlier. Meanwhile, inflation has remained in line with the central bank’s projection and is set to undershoot the 2.5 percent target this year and hover slightly above it in 2019. The annual consumer-price index rose to 1.6 percent in April.
The zloty is a concern, however, after a selloff in May put it on track for a fourth month of declines. In developing Europe this year, it’s the third-worst performer against the euro after Russia’s ruble and the Turkish lira.