PLN appears under pressure – BBH
Analysts at BBH assessed the prospects for the Polish currency.
Key Quotes
“The Polish economy has picked up. GDP rose 4.0% y/y in Q1, the highest since Q4 2015. The growth is driven mainly by increasing consumer demand which has been supported by steady labor conditions and benefits disbursement. The Polish central bank – Narodowy Bank Polski (NBP) – forecasts GDP will rise 3.7% in 2017”.
“Headline inflation has stabilized near the bottom of the 1.5-3.5% target range and core inflation remains low. Inflation pressures from the demand side have been stalled despite growing employment and wages. NPB expects inflation will remain at 2% in both 2017 and 2018”.
“NPB has kept rates at 1.50% since the last 50 bp cut in March 2015, and is unlikely to start hiking rates this year. NPB said the risk of inflation running persistently above the target in the medium term is limited. Governor Glapinski said there might not be a need to hike rates until the end of 2018”.
“The zloty continues to rise against the dollar and the euro. Steady Polish growth under low inflation has supported the zloty. However, a dovish stance by NPB should lead to strengthening inflation pressures and may weigh on the zloty”.