RPP's waiting game

Monetary Policy Council (RPP) members were reluctant to tamper with interest rates ahead of the release of Q3 data from the Central Statistical Office (GUS), and have left the benchmark rate at 4.5 percent.

"September figures are not enough for us to estimate whether economic growth proceeded at the expected scale. We'll have a broader outlook on the matter after the publication of Q3 data by GUS," the board explained in a statement.

However, economic factors are not the only ones influencing the board's decision. Heated discussions over the formation of the new government and the uncertain future of the long-awaited coalition also had a considerable impact on the central bank's moves.

"I would be surprised to see the council lower rates in the current political uncertainty and give a vote of confidence to a government that has not yet been created," commented Katarzyna Zajdel-Kurowska, Citibank Handlowy's chief economist.

Nevertheless, analysts expect that interest rates might be cut in November. Lars Christensen from Danske Bank said: "There are a number of reasons to expect further easing of monetary policy in the coming months. Inflation continues to track some way below the NBP's inflation target of 2.5 percent and we expect it to fall to around 1.5 percent by the end of the year."

According to Łukasz Tarnawa, the chief economist at Bank PKO BP, the bias has been maintained at easing due to the very gradual growth witnessed in domestic demand. Furthermore, inflation data is not threatening price pressure and there is little risk of second-round inflationary effects from high oil prices. (Reuters)