National Bank of Poland likely to maintain key interest rate at 1.5 pct

The National Bank of Poland’s Monetary Policy Council is expected to keep its key interest rate unchanged during its meeting tomorrow. According to a Societe Generale research note, the MPC is anticipated to maintain the rates at 1.5 percent and it will remain at that level for the rest of this year.

Moreover, the MPC might begin considering cutting the required reserve rate because of problems with investment growth at certain point in the future. The council might begin discussions regarding the 2017 monetary policy guidelines, new monetary policy tools or the redefinition of the inflation target rate, said Societe Generale.

The focus would be on the Council’s behaviour and possible changes in their opinions after the subdued second quarter GDP and investment data. Moreover, July’s data from the real economy came as a negative surprise. It is anticipated that there is no majority in the Council to lower rate because of the recent deceleration in the economy, noted Societe Generale.

Firstly, majority in the Council believe that reduction in interest rate might have a restricted effect on the Polish economy. Secondly, part of the slowdown might probably be taken as a one-off phenomenon. Execution of the new retail tax might affect the price outlook beginning from September. Food prices are unlikely to decline deeply at the end of 2016, added Societe Generale.