Poland: Time to pretend
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- The rhetoric of Polish central bankers has become much more hawkish recently and it does not seem unfounded to ask whether we could see an interest rate hike at the MPC meeting starting today.
- A call for a tighter monetary policy in Poland has been connected with PLN weakness until early January, the still excessive level of current inflation and the stronger than expected resilience of the domestic economy to crisis abroad.
- We think that a need to contain elevated inflation expectations justifies hawkish rhetoric (pretending a hike is just around the corner), but a policy tightening is less likely than a rate cut this year.
- Recent gains of the PLN and more appreciation expected by us later in the year will do its job, lowering inflation.
- While we think rate hikes are unjustified, stronger than expected performance of the Polish economy means that our forecast assuming reduction in NBP interest rates in H2 2012 is at risk.