Poland holds rate as H1 growth seen down from H2 2017

      Poland’s central bank left its benchmark reference rate at 1.50 percent, as widely expected, saying the country’s economy will continue to face favorable conditions in coming quarters although growth in the first half of 2018 will probably be lower than in the second half of 2017.
      The National Bank of Poland (NBP), which has maintained its rate since March 2015, also reiterated its recent guidance that the current level of interest rates are conducive to keeping the country’s economy on a path of sustainable growth while inflation is expected to remain close to the bank’s inflation target over the forecast horizon.
       Despite an easing of Polish inflation to 2.0 percent in December from 2.5 percent in November, some economists are looking to a rate hike as soon as in the first half of this year as inflation begins to accelerate on the back of continued solid economic growth.
       But in his December press conference, NBP Governor Adam Glapinski restated that rates are likely to be kept on hold until the end of this year as the rise in the exchange rate of the zloty has acted as monetary tightening.
       In today’s statement the monetary council acknowledged that wages are growing faster than in previous quarters but core inflation, which excludes food and energy, remains low.
       Core inflation rose to only 0.9 percent in November from 0.8 percent in October, well below the central bank’s target of 2.50 percent, plus/minus 1 percentage point.
       Wages grew by an annual rate of 6.5 percent in November, down from 7.4 percent in October.
       In November the central bank raised its 2018 inflation forecast to 1.6-2.9 percent from July’s
forecast of 1.1-2.9  percent but cut the 2019 forecast to 1.7-3.7 percent from 2.3-3.6 percent.
       For 2017 the NBP forecast inflation of 1.9-2.0 percent compared with a previous forecast of 1.6-2.3 percent.
      ”In Poland, incoming data point to continued good economic conditions,” the NBP said, driven by consumer demand on the back of rising employment and wages, benefits and good sentiment.
       Polish exports are also growing while public sector investment has also recovered.
       Poland’s Gross Domestic Product expanded by an annual 4.9 percent in the third quarter, up from 4.0 percent in the second quarter.
       In November the central bank forecast 2017 growth of 3.8-4.6 percent compared with its July forecast of 3.4-4.7 percent. For 2018 the central bank forecast growth of 2.8-4.5 percent, up from 2.5-4.5 percent while the 2019 forecast was unchanged at 2.3-4.3 percent.
       The zloty has risen steadily against the euro in 2017 and rose further today when it was trading at 4.18, unchanged this year but up 5.3 percent since the start of 2017.

      The National Bank of Poland issued the following statement: