Rate hike on the horizon

As expected, the Polish central bank left interest rates unchanged after last week's meeting of the Monetary Policy Council (RPP). The main interest rate stands at 4.0 percent, and inflation in February amounted to 1.6 percent, markedly below the RPP's 2.5 percent target.

The decision was in line with almost all analysts' forecasts and had been foreshadowed by comments from council members. "It is important that the tightening cycle is gradual, allowing for two to three small rate hikes every three or four months, for example. This would stabilize inflation around the target and would not harm the economy," commented council member Dariusz Filar earlier this month.

There is, however, some disagreement among experts as to when the central bank will next raise interest rates. Analysts with Citibank Handlowy pointed to April as a likely time for a rate hike, citing evidence from the RPP's policy statement. Rafał Benecki, a senior economist with ING Bank Ślàski, suggested that a hike could occur soon but not necessarily next month. "The council may raise rates in April after the new inflation projection comes out, or in May when the council will have new GDP and BAEL data," he said.

Poland's economic performance has exceeded forecasts so far this year and could see seven percent growth in the first quarter. Other central banks in the region have recently issued similar decisions or even cut interests rates, but pressure from hawkish RPP members and a global trend of rising interest rates are most likely to result in an eventual rate hike. (Reuters)