The National Bank of Poland is expected to opt for a hold on Thursday, with the key reference rate of interest staying at 5.75% for the seventh consecutive meeting and little sign of a policy change before July’s inflation projections. (see MNI EM NBP WATCH: Interest Rates Held For Sixth Time In Row)

Inflation picked up from 2.0% in March - within the NBP’s tolerance band - to 2.4% in April, but with core inflation still substantially above-target at 5.4%. The reintroduction of VAT on food and the partial removal of energy subsidies in the second half of the year, still-tight labour markets, together with the gradual passthrough of strong public-sector pay rises into consumer spending are all seen as upside risks to the inflation outlook. (See MNI EM INTERVIEW: CEE Recovery, Risks Remain - WIIW Economists)

However, as it made plain last month, despite an anticipated uptick in price pressures, a clear majority of the Monetary Policy Council expects annual CPI growth to run “at the level consistent with the NBP inflation target,” thanks in part to low demand and weakened economic conditions abroad.

Governor Adam Glapinski is likely to reiterate his view that there is at present no clear case for rate cuts, and the monetary stance could remain in its current form until at least the end of the year.