Although most analysts failed to predict it, the decision by the National Bank of Poland’s monetary policy committee to increase its benchmark seven-day intervention rate on June 27 by a quarter point to 4.50% had only a marginal impact in the market. The zloty strengthened, as might have been expected, but there was only an extremely modest sell-off in the bond markets, particularly at the long end. Most activity took place at the short end of the yield curve.
In a statement that accompanied the rate increase, the central bank said: "Data since our last policy meeting confirm that a high level of economic activity should be sustained for the next several quarters, although the rate of economic growth will probably be somewhat lower than in the first quarter of 2007."
According to Raiffeisen Zentralbank Österreich (RZB), the market had not expected any move until July, when the central bank publishes its inflation report. "The balance of power between hawks and doves in MPC is close and RZB analysts suspect that the rate hike was decided by a thin majority," said RZB. "The fact that MPC did not wait with the hike until the new inflation report is published suggests that its view on the Polish economy has changed significantly and higher than expected wages data was just a trigger for that."