December 1, 2017 / 3:44 PM / a year ago

Analysts still see unchanged Polish rates ahead despite CPI jump: Reuters poll

WARSAW (Reuters) - Poland’s central bank probably will not raise interest rates until late in 2018, according to a Reuters poll of analysts and economists released on Friday - a forecast unchanged from last month’s poll.

All 19 analysts polled on Dec. 1 expect the bank’s rate-setting Monetary Policy Council to keep the benchmark rate at its record low of 1.50 percent when its meeting next week ends on Tuesday.

The median forecast was for no change until a 25-basis-point increase in the fourth quarter of 2018. Rates are then expected to rise further, to 2.00 percent, by the middle of 2019.

“Only a pick-up in core inflation will become a sufficient argument for this Council to raise rates, and we expect core inflation to accelerate starting from the middle of next year,” said Jakub Rybacki, an economist at ING Bank Slaski.

He also said that apart from a weakness in investment, there were not enough rate setters to outvote central bank governor Adam Glapinski, following recent relatively dovish comments from Jerzy Kropiwnicki and Grazyna Ancyparowicz.

Glapinski reiterated in November, in comments he had been repeating for several months, that he would keep rates flat until the end of 2018 unless the bank’s forecasts changed materially.

Still, his near-term forecasts for inflation were proven wrong on Thursday when data showed that inflation jumped to 2.5 percent in November. Unemployment is at a record low and wages are rising at their fastest pace in many years.

Glapinski had said in October that inflation would slow from September’s level of 2.2 percent in the near term.

“If the starting point for inflation in early 2018 is clearly higher than expected before, then it may peak at 3.7 to 3.8 percent during the year,” said Adam Antoniak, economist at Bank Pekao SA.

“Such an inflation path should lead the central bank to act now,” said Antoniak, who nevertheless expects the first increase in late 2018.

The governor has said that it was “unimaginable” for inflation to hit 3.5 percent, the upper level of the central bank’s 2.5 percent inflation target, over the next two years.

Poland had experienced more than two years of deflation until last November. Since then inflation has revived, fueled by booming consumer spending and economic growth approaching 5 percent.

The scale of monetary tightening priced in over the next 12 months PLN12X15F= PLNFRA rose to its highest level in more that three years on Thursday. About 33 basis points of tightening is now fully priced in by the start of next December.

The central bank has kept rates unchanged in Poland since a half-percentage-point cut in March 2015.

Reporting by Marcin Goettig; Editing by Larry King

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