The Monetary Policy Council (MPC) of Poland kept its key interest policy rate at 1.5% last week, unchanged since March 2015. CPI inflation fell to a two-year low of 1.1% y/y in December, well below the MPC’s 2.5% target, and core inflation eased to 0.6%. The National Bank of the Czech Republic (CNB) left its policy rate at 1.75%. CPI inflation had fallen to 2.0% y/y at end-2018, right at the CNB’s target. However, it rose to 2.5% in January, mainly driven by accelerating prices for housing and utilities. The National Bank of Romania (NBR) held its policy rate unchanged at 2.5% as CPI inflation remained constant at 3.3% y/y in January, just below the upper bound of the NBR’s 2.5% ± 1pp target range. The NBR thus argued that it is maintaining price stability. As economic growth is forecast to moderate in the region, inflationary pressures should remain in check, by and large. In 2019, we expect at most one policy rate hike in Poland and at most two in the Czech Republic and Romania.
