NBP sees stable rates at least until the end of 2014H1

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NBP sees stable rates at least until the end of 2014H1

First hike might come at the turn of 2014Q3 and 2014Q4

The impact of GDP revisions in Hungary and the Czech Republic on trading was eventually negligible; the koruna slightly fell against the euro despite the marked positive correction of Czech GDP for the third quarter and EUR/CZK pair reapproached a 4½-year low later in the afternoon. On the contrary, the forint and the zloty strengthened against the euro.

Regarding the meeting of the National Bank of Poland (NBP), it delivered more or less expected outcomes. While the central bank acknowledged improving conditions in the domestic economy and its positive consequences for labour market, it added that the demand and cost pressures remain limited. Although Mr. Belka, the NBP president, admitted in a press conference that the pace of recovery may be faster than indicated by current forecast, the NBP kept the forward guidance that the official interest rates should remain at current levels at least until the end of the first half of 2014 unchanged.

Although the recent development has supported our bets on faster economic recovery in Poland (in 2014, the central bank expects 2.9% growth while we estimate 3.1% with upside risks), outlook for persistently low inflation and NBP’s strong emphasis on forward guidance along with the fact that all members of the Monetary Policy Council agreed upon it, made us review our scenario and we newly expect that the first rate hike (25 bps) may come rather at the turn of the third and the fourth quarter of 2014.