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Tuesday, March 5, 2024

Interest rates – December 2023. Monetary Policy Council – the last meeting in 2023 has started. What will the MPC do?

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The Monetary Policy Council started a two-day decision-making meeting on Tuesday. Economists of the largest banks expect interest rates to remain at current levels. This is the last MPC meeting this year.

The Monetary Policy Council started a two-day meeting on Tuesday. We should know the decision on interest rates on Wednesday afternoon. This is the most important event on the domestic financial market this week.

In September this year The council decided to lower it NBP interest rates by 75 basis points. This was the first interest rate cut since May 2020. In October, the Monetary Policy Council cut rates by another 25 basis points. In turn, in November the Council kept interest rates unchanged. It was a surprising decision for economists of the largest banks in Poland, who expected another cut – by 25 basis points (as it happened in October).

The reference rate is currently 5.75%.

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December meeting of the Monetary Policy Council

“This week, nominally the most important domestic event will be the MPC meeting, but effectively it will probably not bring anything. The Council rarely changes rates in the last month of the year, and the latest statements of MPC members indicate zero probability of such a move this year, similarly to the meetings in January and February,” wrote PKO Bank Polski economists.

Representatives of this bank assume that the NBP reference rate will be maintained at 5.75%. ING Bank Śląski economists also expect that the Council will leave interest rates unchanged.

Bank Pekao economists are also cooling down their emotions. As they wrote in Tuesday’s bulletin, “investors are unlikely to wait for the outcome of the MPC meeting, because it is clear that nothing will happen in Polish monetary policy for several months.”

“The pace of disinflation has slowed down, consumer demand is gaining strength, and the inclination of most Monetary Policy Councils to cut rates has significantly weakened. Additionally, high regulatory uncertainty remains, which was indicated by the Council after the meeting in November. In our opinion, we will have several calm months ahead of us in monetary policy, and the discussion on possible changes in rates may return in March, when the at least short-term prospects for fiscal policy and the new NBP projection for GDP and inflation will be known,” PKO BP economists said.

Holders of mortgage loans in PLN with variable interest rates are waiting for the Monetary Policy Council’s decision. The WIBOR 3M and WIBOR 6M indicators, which determine the loan interest rate, include probable increases or decreases in interest rates that may occur in the next three or six months.

The President of the NBP and the Chairman of the Monetary Policy Council, Adam Glapiński, said after the November meeting of the Council that after previously adjusting the level of rates by a total of 100 basis points, the space for possible reductions in the short term had clearly decreased. The head of the central bank added that the March NBP projection would be crucial for further forecasts.

The first decision-making meeting of the Monetary Policy Council in 2024 is scheduled for January 8-9.

PAP/Maciej Zieliński

Main photo source: Shutterstock

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