BUDAPEST: Poland's zloty led Central European currencies higher on Monday despite a sell-off in local stock markets, with investors eyeing the meetings of the Polish and Romanian central banks this week for signs of tighter monetary policies.
The Polish bank is likely to keep its benchmark interest rate at its record low of 1.50 percent after inflation slowed in December, then raise rates in the first quarter of 2019, a Reuters poll showed on Friday.
After years of monetary easing that helped boost the region's fast-growing economies, the Czech and Romanian central banks had already started raising rates, in a bid to curb inflationary pressures.
Polish and Hungarian rate-setters, however, have maintained their dovish stance, and that is not expected to change when the Polish bank meets on Wednesday.
"As additional labour supply from the Ukraine continues to keep a lid on Polish wage pressure, we believe that the NBP will raise the policy rate in Q3 2019 at the earliest," Barclays said in a note.
The National Bank of Hungary, the region's most dovish central bank, expects to leave its base rate at 0.9 percent until the end of 2020. But some analysts said the bank would not be able to sail against global winds for long.
"The NBH will not be able to pursue its policy independently of the main global central banks: the Fed and the ECB. This means that if winds change suddenly in markets, the NBH will have to be very vigilant for the Hungarian economy to withstand the waves," Gergely Urmossy, an analyst at Erste, said in a note.
The forint, which is supported by Hungary's large current account surplus, traded at 309.88 to the euro at 0919 GMT, steady from Friday.
The Polish zloty was 0.2 percent higher.
The Czech crown was steady after last week's meeting of the Czech central bank, which raised interest rates for a third time and signalled another increase this year.
The Romanian leu traded higher before the central bank meets on Wednesday.
Romania's bank raised its benchmark interest rate by a quarter point to 2 percent for the first time in a decade at its Jan. 8 meeting, as it faces expansionary fiscal and income policies and inflation risks.
Central European stock markets eased in early trade, with Budapest leading losses. The Hungarian index fell one percent as investors assessed the outlook for global monetary policy after a strong US jobs report on Friday caused bond yields to surge on the prospects of rising inflation.
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