Market Overview

No Surprises From Central Banks In Poland And The Czech Republic


The National Bank of Poland (NBP) kept interest rates unchanged, as widely expected. The Monetary Policy Council maintained its assessment that NBP interest rates should be kept unchanged for a longer period of time, i.e. at least until the end of the third quarter of 2014. In the opinion of the Council, gradual economic recovery is likely to continue in the coming quarters, however, inflationary pressures will remain subdued.

The governor of the NBP Marek Belka said that the bank would consider revising its policy statement in July. The MPC will release its macroeconomic forecasts then and probably announce that rates should be kept unchanged at least until the end of the year.

We maintain our forecast that the first rate hike will take place in the second quarter next year. Poland's economy is in the early stages of recovery, which means low inflation and low demand for credit. An important factor determining the decisions of the Monetary Policy Council is also the policy of the European Central Bank, which has announced keeping accommodative policy for an extended period of time.

The Czech central bank (CNB) maintained its commitment to keep monetary conditions loose through a weak exchange rate and near-zero interest rates.

The decision of the CNB was in line with expectations. Hence, the key focus was on macroeconomic forecasts, which may determine policy shifts at a later stage. The updated outlook showed higher economic growth and lower inflation.  The central bank forecasts inflation at the level of 2.3% in the second quarter of 2015 and 2.2% in the third quarter (as compared to 2.8% and 2.5% in February). The bank expects GDP growth by 2.6% in 2014 and 3.3% in 2015 (as compared to 2.2% and 2.8% in February). The Bank Board stated that the probability of a later exit from the exchange rate commitment was increasing and  assessed the risks to the new forecast as being slightly anti-inflationary.

The combination of lower inflation and higher GDP may offset each other as policy factors. However, recent signals from policymakers suggest that they will tend to lean towards an interpretation that lower inflation means the output gap is more negative than previously estimated. That is why, in our opinion, the CNB is likely to delay an exit from its FX intervention policy of targeting EUR-CZK of 27.0 or more. We assume in the baseline scenario that the CNB will end its intervention policy in the second quarter of 2015.

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Growth Aces

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.


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