Poland can wait with another rate hike

Poland's central bank can hold off on future interest rate hikes over the summer, said Monetary Policy Council member Jan Czekaj on Wednesday.

Czekaj predicted that July inflation figures were to be close to the Finance Ministry's estimate of 4.8 percent. "I think yes ... we will need to wait and see what happens in the economy," he said.

However, consumer price figures were also released on Wednesday with data showing no change from month-to-month. Experts believe that the central bank will hold off on raising interest rates, but may raise the rate to 6.25 percent in September.

"[July inflation] is unlikely to impact this month's MPC decision. It seems that the majority of the council members will prefer to leave rates unchanged, particularly given the increased caution connected with the recent zloty strength," said Bartosz Pawlowski, strategist at TD Securities in London to Reuters.

The central bank has raised interest rates eight times since April 2004, bringing the current rate to 6 percent, to fight price growth.

Czekaj said that the strong złoty impacts the Polish economy, especially exports, slowing down the economic growth.

Robert Beange, FX strategist at JP Morgan in London said that the inflation figures were neutral for the złoty. "But, with Euro area growth slowing and the regional food/energy price trends changing, we are bullish on Polish interest rates. As interest rates decline and the current account gap worsens, we expect the złoty to come under pressure to depreciate," he said.

Economists expect the central bank to act in September. "As Jan Czekaj said a rate hike should not come this month, rather [it should come] after the summer holidays," said Maciej Reluga, chief economist at Bank Zachodni WBK to Reuters.

Source: Reuters