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The National Bank of Poland’s Monetary Policy Council is likely to keep the key interest rate on hold at 1.5 percent during its meeting on Wednesday, noted Societe Generale in a research report. Furthermore, the central bank is expected to keep the rates unchanged for the remainder of 2016.
The new governor might begin discussions regarding new monetary policy tools, according to Societe Generale. Furthermore, the MPC might begin considering cutting the required reserve rate because of issues with investment growth sometime in the future.
The new Governor Adam Glapinski has stated his view that as “long as the economy is on growth path, predicted inflation in the mid-term minimal, there are no grounds for changing rates. Only when the economy accelerates and inflation starts to rise significantly, then we can launch a cycle of increases”.
Most of the council is believed to underpin the view that additional reduction in rates might not be beneficial for stability of the bank and will not aid to avert deflation. Currently, the interest rate level is not the focus of investor concern, added Societe Generale.
Former NBP Governor Marek Belka said that “Glapinski is facing uneasy tasks. It’s the banking system and financial stability.” Therefore, the central bank’s reaction to likely FX-mortgage conversion and policy in post-Brexit period is possibly more important than the interest rate decision.
The new council is likely to be quite wary regarding changes to its policy post the Brexit vote. Recent comments from the new members imply that the central bank’s monetary policy will not react to Brexit. Moreover, they believe there is no reason to combat deflation as long as it doesn't have an adverse impact on the Polish economy. There might be a change in this view after Brexit.
Recently, an MPC member Jerzy Zyzynski had stated that the “the investment slowdown in the first quarter had nothing to do with the cost of money, so lowering rates wouldn’t then be effective. The real effect of the government’s actions requires time, allowing us to maintain a ‘wait-and-see’ stance in monetary policy.” Therefore, the new MPC might possibly concentrate on the new instruments for the NBP.
