On Wednesday, the price action was driven by the hope (but at the same time also uncertainty) for a solution for the Spanish banking sector. As a result, Central European currencies gained against the common currency and bonds also strengthened (i.e., yields decreased).
The NBP still in hiking cycle but less hawkish than before
As far as the National Bank of Poland (NBP) meeting is concerned, it brought almost no surprise. The council decided to keep interest rates unchanged and at the same time indicated it might consider further hikes in July when the new projection is released. However, even though the council left the doors open for further tightening, it seems less determined to do so mainly due to the expected slower pace of economic growth. Regarding the comments of Mr. Belka (the NBP president), he reminded that the NBP was ready to curb excessive speculation in the forex market.
We believe that the central bank will leave rates unchanged throughout the rest of this year. We expect that July’s inflation report will point to the somehow slower economic growth than had been anticipated back in March. This might discourage the NBP from further tightening in months ahead.