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NBP Governor indicates lower bound on interest rates

MPC statement unchanged

As we expected, the Monetary Policy Council has left interest rates unchanged today (the reference rate amounts to 1.50%). In the statement after the meeting, the Council repeated the view that "the current level of interest rates is conducive to keeping the Polish economy on a sustainable growth path and maintaining macroeconomic stability”. As one month ago, the MPC said in the statement that "current data point to a favourable outlook for economic activity growth in Poland, despite the expected slight slowdown in GDP growth in the coming years” and "in line with the available forecasts, inflation will remain close to the target in the monetary policy transmission horizon.”

NBP Governor indicates lower bound on interest rates

The tone of the conference after the Council meeting has not changed compared to the previous month. The NBP Governor, A. Glapiński, pointed out that currently he could not see any inflationary pressure, wage pressure, or imbalances in the economy. He maintained the view that interest rates would be left unchanged most probably until the end of 2019 and, unless unexpected events occurred (e.g. political risk abroad), also in 2020. Present at the conference MPC member, K. Zubelewicz, was of a similar opinion. J. Osiatyński stated that it was a long forecast horizon and that he was "not so bold in his predictions”.

Like a month ago, the NBP Governor pointed out that the likelihood of further interest rate hikes was small due to the "structure of the banking system”. In his view, in a purely hypothetical situation of a sharp slowdown of economic growth and zero inflation, the MPC would most probably ease the monetary policy using unconventional tools. However concrete instruments were not quoted, as, in A. Glapiński's opinion, they would depend on the specific macroeconomic situation. K. Zubelewicz pointed out that currently "there are no prospects” of using such tools in the monetary policy.

Interest rates unchanged at least until Q4 2019

Today's remarks of A. Glapiński pose a downside risk to our forecast of NBP interest rates (first hike by 25 bp in November 2019). We believe that the market expectations concerning the date of the first interest rate hike (currently at the turn of Q3 and Q4 2019) will gradually converge to the scenario presented by A. Glapiński. Today's remarks of the NBP Governor are neutral for PLN and bond yields.