Wednesday’s meeting of the Monetary Policy Council (MPC) was in the center of investors’ attention, especially after the situation was complicated by the latest inflation reading. It turned out that prices in Poland increased more than expected.
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The MPC did not surprise and did not change rates. The reference rate is still 0.1%. This is a decision that markets and economists have been expecting.
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In order to stimulate the economy during the crisis, the MPC cut interest rates sharply last year (the reference rate was lowered from 1.5% to 0.1%). As a result of this decision, among others borrowers pay lower installments, but savers get lower interest on money deposited with banks.
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Economists are still convinced that interest rates in Poland will remain unchanged until the end of the MPC term, i.e. until 2022. Such signals were sent earlier by the MPC chairman Adam Glapiński and some members of the Council. More interesting than the MPC’s decision may be, however, the communiqué, which will be released at 4 p.m.
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See also: High mortality in Poland. Paweł Borys on new restrictions
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After the outbreak of the coronavirus epidemic in Poland, the MPC meeting was shortened from two to one day. The conference with the participation of the NBP president, during which he answered questions asked by journalists, was also abandoned. Currently, the Council is limited to issuing a communiqué after the meeting. Additionally, the President of the National Bank of Poland, Adam Glapiński, will respond on Friday at 15.00 for questions previously sent by journalists.
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Statement after the MPC meeting
In the communiqué, investors will look for changes in the MPC rhetoric, which has not deviated from the set course recently. However, the situation of the Council was complicated by the latest inflation data and weak zloty.
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Interest rates are a powerful tool for influencing the economy. They affect not only the amount of interest that the bank pays on savings or the amount of loan installments, but also the exchange rate of the native currency and the price level.
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Other central banks in the region also cut rates, but now they send signals of possible hikes, especially if inflation turns out to be too high (low rates fuel price increases). On the other hand, the MPC has not changed its rhetoric so far. “Higher inflation in March will be treated as the beginning of the expected series of higher readings and ignored for the time being,” mBank’s economists assessed on Wednesday morning, even before the MPC decision.
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Apart from inflation, the factor that may encourage the MPC to some correction of rhetoric may also be the zloty weakening. Although in recent days the zloty has started to recover, at the beginning of last week it was the weakest against the euro in 12 years.
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According to some economists, the most important aspect of the Wednesday’s MPC meeting is the exchange rate issue – A possible modification of the sentence regularly repeated in the MPC’s communiqué about the insufficient response of the exchange rate to interest rate cuts would be a signal of the MPC’s sensitivity to the recent pressure on the zloty – assessed the economists of PKO BP.
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According to economists from Bank Pekao, in light of the recent weakening of the zloty, the MPC will change parts of the statement regarding the exchange rate policy and the behavior of the exchange rate.
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