NBP rates “definitely” unchanged until the end of 2018

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 continue to 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.”

The Council slightly more dovish

The remarks of present at the conference NBP Governor A. Glapiński and MPC members E. Gatnar and R. Sura indicate that, compared to last month, the medium-term inflation risk has decreased in the Council's opinion. The NBP Governor, A. Glapiński signaled that the inflation path expected in the July NBP projection would most probably be lower from the one forecast in the March projection. He also believed that total inflationary effect of higher oil prices, lower wage growth (see MACROmap of 21/5/2018), and PLN weakening, recorded in recent weeks, would be limited. On the other hand, E. Gatnar stated that currently he could not see "such wage pressure as he had expected” and that weaker PLN was favourable for exporters. In turn, R. Sura pointed to the government-announced facilitations in employment of foreigners which will be conducive to a lower wage pressure.

NBP rates "definitely” unchanged until the end of 2018

In our view A. Glapiński's statement concerning the outlook for interest rates "in the visible horizon the stabilization of interest rates seems to be obvious” sums up well today's dovish remarks of MPC members present at the meeting. He added that interest rates would "definitely” not change until the end of 2018 and were "very likely” to stay at the current level in 2019. In the opinion of E. Gatnar, any rate cuts would be negative for the banking sector stability. This view is consistent with the earlier-expressed opinion of the NBP Governor that NBP rate has reached the bottom limit and monetary easing, if any, will be implemented using non-conventional tools.

Slight downside risk to our forecast of NBP rates

Today's remarks of A. Glapiński and MPC members confirm the continuing downside risk to our forecast of NBP interest rates (first hike by 25 bp in November 2019). Current market expectations concerning the date of the first interest rate hike are consistent with our scenario. The remarks of the NBP Governor and MPC members are slightly negative for PLN and bond yields.