MPC statement with no 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”. 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.”

The NBP Governor has maintained his dovish stance

At the conference after the meeting, the NBP Governor, A. Glapiński admitted that the March inflation had proved to be lower from NBP expectations. A. Glapiński indicated that lower inflation did not change his views or the position of most Council members concerning the monetary policy outlook, and the inflation expectations of some MPC members had become lower. Then the NBP Governor stated that the monetary tightening was being postponed. He also added that he saw no factors that would have forced the MPC to change interest rates within the next two years. A. Glapiński pointed out that the inflation path in the July projection would probably be revised downwards.

Downside risk to our forecast of NBP interest rates

The above remarks indicate that the NBP Governor has maintained his dovish stance expressed after the March MPC meeting. He pointed out at the time that – if the scenario outlined in the March inflation projection materialized – the NBP interest rates should have stayed at the current level until the end of 2020.

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

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