MPC is not concerned about the ECJ’s ruling on CHF loans

MPC statement without substantial 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”. The Council also noted that the economic outlook remained favourable, and GDP growth, despite the expected decline, would continue at a relatively high level in the coming years. Like the month before, the Council stated that: “however, uncertainty about the scale and persistence of the slowdown abroad and its impact on domestic economic activity has increased”. The Council also expects that "inflation - after a temporary rise in 2020 Q1- will stay close to the target in the monetary policy transmission horizon” (2.5% +/- 1 pp).

“The situation is excellent”

During the conference the NBP Governor, A. Glapiński, presented the current, short-term macroeconomic forecasts. They predict economic growth at a level of 4.3% YoY and inflation amounting to 2.3% in 2019. At the beginning of 2020 the NBP expects a slowdown of economic growth and increase in inflation (i.a. due to higher electricity prices). The Governor stated that taking into account the entire current year “the situation is excellent”. The macroeconomic scenario painted by the NBP Governor is close to our forecasts (see MACROmap of 9/9/2019).

Referring to possible further deterioration abroad, the NBP Governor pointed out that the MPC was “very far” from easing the monetary policy. He also added that the stimulation of the economy, if any, would be done using traditional tools (i.e. interest rate cuts) instead of unconventional instruments. In the context of the interest rate outlook, A. Glapiński repeated the view he voiced several months ago that the NBP rates might remain stable until the end of the MPC term.

MPC is not concerned about the ECJ’s ruling on CHF loans

Asked about tomorrow’s ECJ’s ruling (see MACROmap of 30/10/2019), the NBP Governor informed that he did not anticipate “any negative scenario”. A. Glapiński spoke lightly of the ruling implications, pointing out that it will apply only to some credit contracts of only some banks, and its possible effects for the banking sector would be spread over years. He emphasized that adequate “recommendations and guidelines” for banks (consisting mainly of increasing capital base) had already been given. The Governor indicated that the issue of PLN exchange rate was not usually commented on by the central bank, however from the MPC’s point of view “there is nothing to worry about with regard to the exchange rate”.

Interest rates unchanged at least until the end of 2020

Today's remarks of A. Glapiński support our scenario, in which NBP interest rates will remain unchanged at least until the end of 2020. The expected by us accommodative monetary policy of the ECB (another deposit rate cut, continuation of the quantitative easing program) is consistent with this forecast. In our view, the text of the statement after the MPC meeting and the remarks of the NBP Governor at today's conference are neutral for PLN and bond yields.