Poland to Defy Inflation Surprise by Extending Record Rate Pause

(Bloomberg) -- A sharp jump in inflation won’t be enough to end Poland’s longest spell of stable interest rates.

While consumer prices are surging the most since 2017, their growth is still below target and dovish central bank Governor Adam Glapinski doesn’t see borrowing costs budging for the foreseeable future, particularly as the world’s major economies retreat from tightening monetary policy.

All economists polled by Bloomberg see Poland’s record-low benchmark rate staying unchanged at 1.5% on Wednesday, where it’s been for four years.

The situation isn’t dissimilar in Romania, where inflation quickened for a fourth month in April. The central bank there is expected to keep rates at 2.5%, preferring money markets as a means of controlling prices.

In Warsaw, PKO Bank Polski SA says Glapinski will play down the significance of the latest inflation numbers “and follow his dovish rhetoric.” Even so, “rising inflation will likely fuel market expectations and increase the likelihood of an alternative scenario of a rate hike in early 2020.”

Faster growth in consumer prices prompted the Czech National Bank to raise interest rates to the highest level in a decade this month. But in the U.S. and the euro area, a more dovish mood has taken hold amid concerns over global growth and trade tensions.

Despite April’s inflation surprise, Glapinski’s opinion “will still dominate,” Santander Polska economists led by Piotr Bielski said in a note. “The MPC’s internal consensus is unlikely to change significantly as long as inflation remains below 2.5% and before there’s higher conviction that the upward tendency in consumer prices is persistent rather than transitory.”

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