No rate hike, for now

Polish central bank held interest rates unchanged at six percent on Wednesday, a move that was in line with market expectations.

The National Bank of Poland's Monetary Policy Council refrained from raising interest rates, which have been raised 200 basis points since early last year as a way to bring down inflation to the main target of 2.5 percent. However, Poland's economy has began to slow down and future rate hikes can be put off for now, according to analysts.

"As inflation is hovering close to 5 percent, we expect the communiqué to sound relatively hawkish, leaving the open door for one more rate hike. We continue to expect the MPC to hike rates once again this year, probably in October, and it will probably be the last rise in the cycle," said Piotr Kalisz, senior economist at CITI financial.

Inflation hit a seven-year high of 4.8 percent, wage growth remained stable, unemployment dropped, however, industrial output increased by 5.6 percent year on year while analysts predicted a 7.5 percent growth. The July industrial output report had analysts worried that it would send an alarm to MPC's.

  "There are ambiguous signals from the economy," Grzegorz Maliszewski, chief economist at Bank Millennium told Reuters. "On the one hand growing inflation, high wage growth and strong retail sales, on the other a clear slowdown of industrial output, favouring a more cautious approach in policy."

Currency gains and drop in commodity prices have also played a role in easing pressure for further monetary tightening in Poland. Neither the złoty nor bonds were affected after the decision was made.

Source: Reuters