NBP MPC signals status quo for its remaining days

Yesterday's MPC meeting saw the policy rate left unchanged at 1.5% as widely expected, but MPC members acknowledge that latest macroeconomic developments had swung towards the dovish -- the council explicitly stated that the risk had increased that Polish inflation would not reach its 2.5% target in the medium-term. The main threat recently has been lower inflation and commodity prices abroad. 

The MPC nevertheless gave out a firm signal that it was not considering easing policy again: Governor Belka reiterated that deflation would soon reverse, and since the council focusses on the longer-term outlook, it would not react to high-frequency changes, but rather maintain the stable monetary policy environment which has been helping Poland. 

"It is understandable that having 'officially' concluded the rate easing cycle, and given that a new MPC will be in place by February 2016, the present MPC does not want to make major adjustments in its remaining days.

The combination of the sharp drop in the Polish PMI and the fresh deflationary impetus from China increases the likelihood that rates will be lowered afresh in Q1 or early Q2 2016 though once the new MPC has taken over. We will look to revise up our EUR-PLN forecast for 2016", said Commerzbank in a research report on Wednesday.