National Bank of Poland

Claire Jones

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ECB vote

The European Central Bank’s governing council decamps to Ljubljana next week for its October policy vote. This from the FT’s Frankfurt bureau chief Michael Steen on what to expect: 

Claire Jones

Our week ahead email will help you to track the most important events in the central banking world. To see all of our emails and alerts visit www.ft.com/nbe

Both the European Central Bank and the Bank of England will vote on monetary policy on Thursday.

The Monetary Policy Committee decision is out at noon local time (11.00 GMT). According to a Reuters poll, most expect the Bank to hold rates and maintain the stock of asset purchases at £200bn. However, a significant minority predict more QE, with most of these believing that £50bn is the amount that the MPC is most likely to plump for.

Though those expecting more QE in October are in the minority, the bulk of analysts do believe the Bank will expand its asset purchases at some point in the near future, with November considered the most likely option. The Bank also publishes the minutes of its FPC meeting on Monday at 09.30 local time (08.30 GMT), which may shed some light on the rather ambiguous statement that came out this week.   

Claire Jones

Rate decisions

Next week sees a host of central banks vote on monetary policy.

The Reserve Bank of Australia’s board is expected to hold rates on Tuesday. On Wednesday Sweden’s Riksbank, the National Bank of Poland, the Bank of Japan and the Bank of Canada are all set to vote. 

Hawkish comments from Poland’s central bank have translated into a rate rise, a move largely expected by analysts. The quarter point rise leaves the key reference rate at 4 per cent.

Annual inflation was running at 3.3 per cent in the year to February, down from 3.5 per cent in the year to January but still above the Bank’s 2.5 per cent target. After many rumours to the contrary, rates were kept on hold at the last meeting though members did vote on a rate rise. 

Increasingly hawkish statements from Poland’s interest rate-setting Monetary Policy Council have analysts convinced that Poland is in for another rate hike on Tuesday as the central bank resumes its tightening policy.

The expectation is that the council will increase its policy rate by a quarter point to 4 per cent a year – with analysts at Danske Bank predicting that rates will continue their upward climb, hitting 5 per cent within 12 months.

Inflation expectations are on the rise. According to Citi Handlowy bank, they reached 3.9 per cent a year in March. The central bank has also expressed concern about the lacklustre performance of the zloty, which has been sagging on worries over Poland’s budget and the government’s unenthusiastic fiscal tightening programme.

 

A rate rise was a serious option at the last meeting of Poland’s monetary policy committee. Minutes reveal that policymakers held a vote on a quarter point rate rise, but that the majority voted against it because of heightened doubt over growth, coupled with low drivers of aggregate demand (such as high unemployment and low wage pressure):

The majority … represented the view that recent data increased the uncertainty regarding economic growth… Further arguments in favour of this decision included the persistently high unemployment rate and modest wage pressures in the enterprise sector, both reducing the risk that heightened inflation, which up to now has resulted from factors beyond the direct influence of monetary policy, should persist. Furthermore, in the opinion of some Council members, NBP decisions on interest rates should take into account the monetary policy pursued by major central banks, in particular the European Central Bank.

 

The zloty has fallen against the euro after Poland’s central bank decided to keep rates on hold. A large minority of analysts had expected a raise, following above-target inflation data, plus last month’s decision to increase rates 25bp, the first such move since the financial crisis. Signals from the Bank itself had been mixed.

(This paragraph is an update 1530 GMT) Comments from the central bank governor suggest this is a pause rather than a change of heart. “Some members of the Monetary Policy Council saw the January hike as the start of a cycle and I am one of them,” governor Marek Belka told a news conference. 

Disagreement seems to be a public affair at Poland’s central bank. Where other rate-setters cloak their positions or votes in secrecy, Poland’s 10-strong rate-setting council give their diverging views quite openly. This may well be a smart move.

Today, two opposing views were added to an almost exhaustive list of policymakers’ views. Anna Zielinska-Glebocka gave possibly the most hawkish assessment to date, warning of a race against time to beat rising core inflation. Asked by Reuters whether another rate hike may come as early as the MPC’s next sitting on March 1-2, Ms Zielinska-Glebocka said: “I wouldn’t want to say what we will do in March … It seems there is a need to tighten monetary policy. The depth of tightening will be decided by many factors.” Her bullish sentiments follow comments from Jerzy Hausner and Jan Winiecki, both concerned about inflation and eyeing further rate rises.

But balancing that view was 

Another rate rise is likely on March 15, after a member of the MPC said it would have to raise rates to combat a “wave of inflation” coming from abroad. Last month, Poland raised its key refinancing rate 25bp, its first increase since the crisis.

“Through trade, an inflation wave is reaching even here. There is no other way. The MPC (Monetary Policy Council) will have to raise interest rates,” Jerzy Hausner said in an article coauthored with Miroslaw Gronicki, a former finance minister, reports Reuters. 

*Updated 1509GMT

Interest rates will be a quarter of a point higher from tomorrow in Poland, after the MPC voted to increase them. The key refi rate will be 3.75 per cent. The move was expected, after bullish signals in December followed by strong hints from council members in the new year. Those comments suggested this would be the start of a rate normalisation policy, rather than a one-off reactive decision. All else equal, expect further rate rises ahead.

Headline inflation rose to 3.1 per cent in December, driven by higher energy prices. Initial estimates suggest core inflation rose, too. “The inflation rise,” said the Bank, “was accompanied by a rise in inflation expectations.”  This was given as the main reason for the rate rise in today’s news conference.

Governor Marek Belka has also said in recent months that he saw a decreased risk of strong capital inflows into Poland. Inflationary “hot money” inflows are encouraged by rate rises, which increase the return to investors. If those inflows are subsiding, Poland would be liberated to raise interest rates without fear of undue inflation.

Effective tomorrow, the 25bp rate rise will be the first