No change in MPC bias

Interest rates remain unchanged

As we expected, the Monetary Policy Council (MPC) has not changed interest rates at its meeting today (the reference rate is 0.10%). In accordance with the press release, the MPC expects the economic activity to recover in 2021, but the pace of the recovery will depend mainly on the development of the pandemic-related situation and related restrictions. Like in January this year, also the present announcement emphasised a positive impact of measures taken as part of the economic policy, including the easing of the NBP’s monetary policy, on the economic activity. However, the Council maintained its opinion, according to which the heightened uncertainty and the weaker sentiment of economic agents than before the pandemic combined with “the lack of a visible and more durable zloty exchange rate adjustment to the global pandemic shock and to the monetary policy easing introduced by NBP” will slow the economic recovery down. The Council also maintained its statement concerning the foreign exchange policy expressed in the January announcement: “In order to strengthen the impact of NBP’s monetary policy easing on the economy, NBP may also intervene in the foreign exchange market. The timing and scale of the measures taken by NBP will depend on the market conditions”.

In accordance with the announcement, the NBP is going to continue to purchase treasury securities and debt securities guaranteed by the State Treasury on the secondary market as part of structural open market operations (the value of bonds purchased so far is PLN 108.6bn).

NBP to continue to intervene in the currency market

The press release following the MPC meeting is consistent with our revised forecast, in which the MPC will not change interest rates until the end of 2022 (see MACROmap of 1/2/2021). We expect the reference rate to be raised for the first time in Q1 2023 (from 0.10% to 0.25%). This scenario is consistent with available forecasts predicting the development of the COVID-19 pandemic in Poland in the weeks to come, which indicate that the risk of the third wave of the pandemic is limited. Our mid-term forecast for the reference rate is also supported by the expected course of the monetary policy of the European Central Bank, whose balance sheet, after expected stabilisation in 2022, will fall markedly in early 2023. However, it should be emphasised that recent changes in the way the NBP is communicating with the environment suggest that the Polish monetary policy has become significantly less predictable, and there is significant uncertainty regarding how the NBP is going to determine interest rates in the future. The above also applies to the NBP foreign exchange policy. Despite a clear appreciation of the PLN seen over the last couple of days we expect the NBP to continue to intervene in the foreign currency market to reduce the pace and scale of PLN appreciation supported by lower risk aversion that can be seen globally. We still expect the EURPLN rate to stand at 4.50 at the end of Q1 2021, and to begin to fall gradually and consistently in Q2 2021.

In our opinion, the press release following today’s meeting of the Council will be neutral for the PLN and for the bond yields.