Even doves turn jittery as lines blur on Polish central bank

Bloomberg

The Polish central bank could yet waver on its commitment to keep interest rates stable. While three of Poland’s biggest lenders said Governor Adam Glapinski last week delivered the most dovish briefing of his tenure, its message was still so nuanced that some in the market are having second thoughts. The zloty, after a brief decline, has settled down to eke out two days of gains against the euro. The Polish currency also traded slightly stronger on Monday.
Despite raising the possibility for the first time that rates could remain on hold beyond this year and even into 2020, Glapinski went on to say that if needed, he might turn into a “very predatory” dove and noted there’re still three hawks on the 10-person Monetary Policy Council. Only last month, central banker Eugeniusz Gatnar said a preemptive hike may still be needed this year, a sentiment echoed later by fellow MPC member Lukasz Hardt. For Societe Generale SA, changes in rhetoric won’t take long to materialize.
“The council may start to consider changing its communication in the second half of the year if inflation is above target,” said Jaroslaw Janecki, the chief economist for Poland at SocGen in Warsaw. The next set of staff forecasts in July “may highlight growing inflationary risks, but the council will probably still wait for further confirmation of this trend. We think that November’s estimates may prompt rate hikes.” The latest projection, which was published in full on Monday, showed inflation above the central bank’s 2.5 percent mid-point target in 2019 and 2020. This year’s outlook for prices was cut to 2.1 percent from the 2.3 percent seen last November. It was sufficient for Glapinski to say that no change in rates may be warranted any time soon.
A longer horizon for Poland’s policy pause stole the headlines last week and sent bets on tightening in the derivatives market to the least since September.