On Thursday, the National Bank of Poland (NBP) released minutes from its latest policy meeting. The report somehow clarified relatively sharp rhetoric of governor Belka following April’s meeting as it showed that the Monetary Policy Council (MPC) voted on a 25 bps rate hike (recall that, earlier this week, Reuters cited an anonymous source who said that 3 out of 10 MPC members voted for the hike).
According to the minutes, the most of MPC members acknowledge that inflation is supply-driven, but stress persisting high inflation expectations. Consequently, possible second-round effects (i.e., in particular wage pressures) might be, in their opinion, prevented by the rate hike.
However, the report suggested that the MPC members remain divided over the extent of a slowdown in household’s consumption and, more importantly, over the possibility of a rate hike in the near future. As for market expectations, FRA rates suggest that the rate hike is (at least partially) priced in (see the chart).
Meanwhile, the MPC member Zielinska- Glebocka said yesterday that the risks are skewed towards the monetary tightening (which should come rather sooner than later). However, she admitted she was not decided whether she would support the hike. For the time being, we maintain our view that interest rates will be increased in May (05/09). However, we may change our opinion, if inflation expectations(due to Monday) significantly decrease or a hawkish rhetoric of MPC members fades out.
Regarding today’s events, the confidence vote is on the Czech Parliament’s agenda. However, the vote itself is just a formality as the prime minister Necas has 103 committed votes (out of 200 parliament members).