Inflation lull keeps Polish rates shackled as region diverges

Bloomberg

Polish rate setters kept borrowing costs unchanged, sticking to a wait-and-see policy that may last into the next decade as the central bank diverges from other countries in the region already tightening monetary policy.
Below-forecast inflation and higher-than-estimated economic growth have given the Monetary Policy Council all it needs to stick with Governor Adam Glapinski’s stance that rates may stay on hold until 2020.
It kept the key benchmark at a record low of 1.5 percent at a meeting on Wednesday, in line with the forecasts of all 32 economists in a Bloomberg survey.
The stability pledge puts Poland at odds with policy makers in Romania and the Czech Republic, who are weighing tightening policy further after three hikes each since last year.
But in contrast to price growth taking hold in those countries, Polish inflation is seen decelerating despite wages expanding 7.8 percent from a year earlier, the fastest pace since the start of 2012.
“The probability of monetary tightening in 2019 remains low,” Katarzyna Rzentarzewska, an economist at Erste Group AG in Vienna, said before the decision was announced.
“Despite robust growth and a tight labor market, inflationary pressure remains limited, allowing to keep the rate flat for longer.”