Poland's MPC is expected to announce the new Monetary Policy Guidelines for 2016 in September (probably after the September MPC meeting). The possibility that the council will change the inflation target cannot be ruled out. This would actually be quite problematic because it means that the new council would then be forced to implement guidelines proposed by the current council.



"Also, with inflation currently too low (vs the inflation target), it is not a good time to lower the inflation target. However, sooner or later the MPC will redefine the inflation target, as inflation of close to but below 2.5% would be more appropriate than the current target of 2.5% with a permissible fluctuation of +/- 1 percentage point", says Societe Generale.



The redefinition of the inflation target would more adequately reflect the NBP's objective. According to the NBP Act (Article 3 section 1): "the basic objective of the activity of the NBP shall be to maintain price stability, while supporting the economic policy of the government, insofar as this does not constrain the pursuit of the basic objective of the NBP".



"So, inflation below 1.5% would be in line with the Act and with the NBP's inflation target, which is not the case under the current inflation target definition", added Societe Generale.