The Monetary Policy Council of the Polish central bank (NBP) is meeting next week. Contrary to the consensus expectation that the NBP will keep its key policy rate unchanged, we expect a rate cut of 25bp to 3.0%.
Even though the NBP has been surprisingly hawkish over the past year, we think that the majority of Monetary Policy Council members have now come to the conclusion that there are no real inflation pressures in Poland. In fact, given the combination of a sharp slowdown in growth and lower commodity prices, we could very well see Polish headline inflation drop close to zero in the coming month. Our latest update for the Polish economy - published earlier today - also indicates that the risks to Polish growth and inflation are on the downside. See more on our new forecast below and read Macro Monitor Poland.
Hence, we find it very difficult to argue against substantial monetary easing in Poland. That said, we have certainly been negatively surprised before by the NBP's reluctance to counteract the marked slowdown in growth and inflation.
While the majority of analysts expect unchanged Polish interest rates next week, the market is already priced for significantly lower interest rates in the coming months. Hence, a 25bp rate cut is unlikely to move the markets much, while if we are wrong and the NBP keeps rates unchanged then it would likely push up Polish rates and yields and lead to a strengthening of the zloty.
To Read the Entire Report Please Click on the pdf File Below.
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On Poland's Monetary Policies
Published 05/03/2013, 07:35 AM
Updated 05/14/2017, 06:45 AM
On Poland's Monetary Policies
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