On Wednesday, Central European currencies experienced a mixed trading. The zloty and the forint posted small losses, whereas the EUR/CZK cross rate edged lower and closed below 200 days moving average (at 24.816).
Nevertheless, the regional highlight was the National Bank of Poland’s (NBP) meeting. Although the NBP left rates unchanged (such a result was broadly expected), it confirmed its rather hawkish policy stance (in comparison with both market expectations and Bloomberg consensus, see the chart). In an official statement, the NBP said that “The Council does not rule out the possibility of further monetary policy adjustments in the future, should the outlook for inflation returning to the target deteriorate”. NBP president Marek Belka once again disappointed dovish investors as he told a press conference that although the zloty exchange rate had developed favourably (from inflation point of view) in recent weeks, the NBP could not base its policy on that. Moreover, the fact that growth of the economy seems to be more robust than previously thought also speaks in favour of tighter monetary policy in months ahead.
Even though we expect some slowdown we still estimate that the economy will grow at a decent pace this year. Together with heightened inflation (which might, however, slightly ease in Q1/2012) could convince the NBP to leave interest rates unchanged throughout 2012. The new inflation report due to March might shed more light on future steps of the NBP.