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NBP Is Forced To Act Again - Another 25bp Cut On Cards

ByDanske Markets
Published 05/30/2013, 06:49 AM
Updated 05/14/2017, 06:45 AM

Q1 GDP clearly showed that the Polish economy is in worse shape than assumed, which together with very low inflation now well below the official central bank's target of 2.5% +/-1pp and even below 1%, argues for further easing. We think that next week's rate decision will be less nerve wracking and the outcome less uncertain, as we are quite confident the Polish central bank (NBP) will deliver yet another 25bp rate cut at the Monetary Policy Council (RPP) meeting. This is also the consensus view. Indeed, the NBP could surprise with a larger 50bp rate cut next week, as there is still plenty of room for easing, but we think the NBP will stick to a 'less radical' move and deliver only 25bp next week.

Given the bleak economic outlook, the Polish central bank is not even near the end of the easing cycle. Apart from the potential 25bp rate cut next week, which should bring the key policy rate to 2.75%, we expect the NBP to bring the key policy rate to 2.0% in coming months. Continued monetary easing due to the sluggish economy should put some depreciation pressure on the zloty. Even though the Polish currency has been under quite a lot of pressure over the past two weeks, our EMEA FX Scorecard currently points to further weakening.

To Read the Entire Report Please Click on the pdf File Below.

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