Numerous minor changes in the MPC statement

As we expected, the Monetary Policy Council has not changed interest rates today (the reference rate amounts to 0.10%). In the statement after the meeting numerous changes were introduced highlighting the dynamically changing situation home and abroad. The Council maintained the view that “a further recovery in economic activity can be expected over the coming months” but added a fragment saying that its pace may be slower than observed so far. The wording from the September statement that “the economic policy measures, including the easing of NBP's monetary policy” would support the improvement in the economic situation was also repeated. However the fragment about the positive impact of further improvement of the situation abroad on the Polish economy has been removed. In addition the statement emphasized the good situation in the labour market – the “decline” in the number of people employed and in wage growth has been replaced by their “stabilization”. In addition, “lower income growth” has been removed from the group of factors limiting economic recovery.

MPC has noted the temporary weakening of PLN

The MPC noted that the global spike of COVID-19 infections has contributed to weaker sentiment in international financial markets, as reflected, inter alia, by the depreciation of the emerging currencies (including PLN). The statement also included a view from the month before that “the pace of the economic recovery could also be limited by the lack of visible and more durable zloty exchange rate adjustment to the global pandemic-driven shock and to the monetary policy easing introduced by NBP”. The word “more durable” is a new element compared to the September statement. This means that, according to the MPC, the depreciation of PLN must be visible and durable for its positive impact on economic growth and inflation to be significant. The adding of this word signals a change in the MPC bias to a more dovish one.

No changes in the monetary policy scenario

Apart from the said fragment, it is difficult to find in the statement any other signals pointing to a change in the MPC bias in the monetary policy. This supports our scenario in which the Council will not decide to introduce any unconventional tools of monetary easing and the first hike of the NBP reference rate (from 0.10% to 0.25%) will take place in November 2022. In accordance with the statement, the NBP will continue to purchase treasury securities and government-guaranteed debt securities on the secondary market as part of structural open market operations (the value of bonds purchased so far has reached PLN 103.9bn).

The text of the statement after today’s meeting of the Council is slightly negative for PLN and bond yields, we believe.

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