Poland's central bank kept interest rates on hold on Wednesday but gave a strong signal it would raise the country's borrowing costs in the near future to ensure that inflation stays close to its target.
Poland's economy has continued to accelerate in recent months and wages have picked up, prompting some bankers to warn a rise in its main rate was needed to prevent inflation jumping above the 2.5 percent target.
A wave of strong data and statements from several policymakers in March supported expectations the 10-strong council would move soon and analysts said the bank's statement showed clearly a hike in April or May was on the cards. In the statement, the council removed wording indicating that current rates could be enough to keep inflation on target.
"Stabilising inflation around the 2.5 percent target and thus creating conditions for long-term economic growth may require a tightening of monetary policy in the near future," the statement said.
The bank's main rate now stands at a record low of 4.0 percent. Inflation rose to 1.9 percent in February. "It is pretty clear to us, from the wording in the statement, that the hike will be delivered on April 25," UniCredit economist Piotr Chwiejczak said in a note to clients after the decision.
Many investors, however, had expected an even more hawkish statement from the bank and local bonds inched higher as markets judged the timing of tightening to remain in the balance.
The council said the scale of the tightening would depend to a large degree on whether domestic demand continued to rise strongly, driving the economy at a faster pace than its ideal non-inflationary rate.
"Things start to become complicated when trying to pin down the next move after April," said UniCredit's Chwiejczak. "The statement is much less clear on the scale and pace of rises." A majority of the council voted against raising rates at the end of last year, and it remains unclear where the council's hawks can find the additional votes needed to pass a rise.
"The key people now are Governor (Slawomir) Skrzypek, Stanislaw Owsiak and Jan Czekaj - at least one of them has to vote for a rise in rates for it to happen," said Raiffeisen Bank analyst Jacek Wisniewski. Neither Czekaj nor Owsiak were present at Wednesday's news conference, but Skrzypek said it was hard to say when the council would deliver a first rise and his comments on the economy placed him firmly in the council's dovish camp.
"Skrzypek's comments indicate that he is still not convinced about the need for an imminent rate move," said Nora Szentivanyi, regional economist with J.P. Morgan in London. "In particular, he expects the new inflation projection to show a lower path of inflation than in January." Dariusz Filar, a firm supporter of higher rates, told the news conference the key would be the extent to which wage growth outpaces productivity in the economy as a whole.