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Tuesday, May 21, 2024

Interest rates – April 2023. Announcement of the MPC meeting

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Interest rates in Poland have not changed since October 2022. The Monetary Policy Council (RPP) starts a two-day meeting on Tuesday. According to analysts, the MPC will not change interest rates. However, some economists estimate that if the price pressure does not slow down in Poland, the discussion about interest rate increases will return.

We should know the MPC decision on interest rates on Wednesday. It will take place after the publication of the preliminary reading inflation consumer index for March, which was higher than market expectations. From Friday’s preliminary data from the Central Statistical Office shows that the prices of consumer goods and services in March 2023 increased by 16.2% on an annual basis, while the market expected an increase of 15.8%.

Interest rates in Poland

“No one assumes a change in monetary policy parameters in April, and attention will focus on the tone of the post-decision commentary,” PKO BP said in Monday’s market report.

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Monetary Policy Council last interest rate increases made in September 2022. At that time, the main NBP interest rate, the reference rate, was raised to 6.75 percent, and the deposit rate to 6.25 percent. and the lombard rate to 7.25 percent. The discount rate on bills of exchange was then raised to 6.85 percent. and the rediscount rate of bills of exchange – up to 6.8 percent.

PAP

Meeting of the Monetary Policy Council (MPC) – April 2023

“In reaction to the new (inflation) data, investors have partially reduced their expectations for interest rate cuts in the country. Instead of three cuts, the FRA market is now pricing in two rate cuts before the end of this year. However, given the series of inflation data from recent months, our In my opinion, it is reasonable to ask whether there is room for rate cuts in Poland at all. An even more important question is whether the next move of the Monetary Policy Council should really be a rate cut or another hike,” Citi Handlowy wrote in a Monday report.

“Our own forecast assumes stable interest rates in 2023 and gradual reductions in 2024. However, the expectations of cuts next year are based on a scenario of slowing down the price pressure, i.e. a scenario that has not even started to materialize. If the next inflation data does not bring In this regard, a breakthrough, the discussion of further increases may become fully justified.

In the opinion of Citi experts, taking into account the domestic conditions (double-digit wage increases, still loose fiscal policy, negative real interest rates), the factors reducing the price pressure can be found mainly abroad.

In their opinion, interest rate hikes by the Fed and the ECB have a chance to only partially reduce price pressure in the country by lowering imported inflation and it is difficult to build expectations for a quick return of domestic inflation to the target.

Main photo source: MOZCO Mat Szymanski – stock.adobe.com



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