Interest rates to remain unchanged though not until the end of the MPC term?

Statement after the MPC meeting with no significant changes

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”. Like the month before, the Council emphasized that the outlook for economic conditions in Poland remained favourable, however, in the quarters to come, there would probably be a gradual slowdown in GDP growth. In the Council's assessment, "according to current forecasts, the annual price growth will increase in the coming months, yet – due to lower oil prices than in 2018 Q3 and the freeze on electricity prices – the scale of this increase will be markedly smaller than anticipated in the November projection”. The Council repeated the view that "in the monetary policy transmission horizon inflation will remain close to the target”.

Interest rates to remain unchanged though not until the end of the MPC term?

At the conference after the MPC meeting, A. Glapiński said that for the time being no change in interest rates was imminent. Asked if he maintained his view voiced a month ago that interest rates might remain stable until the end of MPC term (the beginning of 2022), he answered that "the rates may remain unchanged this year and probably also next year”. The Governor pointed to Poland's external environment as the main risk to the level of interest rates in the longer term. Thus, A. Glapiński has returned with his position concerning stable interest rates horizon to the view expressed before the January MPC meeting. Present at the conference G. Ancyparowicz presented a similar judgment – "it is not impossible that the rates will be left at the present level until the end of this year and, to a certain extent, next year”

The NBP Governor said that the GDP growth rate was likely to be higher than anticipated in the November NBP projection (3.6%) and would stand at above 4% while inflation would reach a level of "around 2%, below 2%”. More details concerning the MPC expectations concerning the outlook for economic conditions in Poland will be known in March together with the publication of the latest inflation projection.

NBP rates unchanged until March 2020

Today's remarks of A. Glapiński support our scenario, in which NBP interest rates will remain unchanged until the end of 2019 and the first hike (by 25 bp) will take place in March 2020. In our view, today's remarks of the NBP Governor are neutral for PLN and bond yields.