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Tuesday, February 27, 2024

Interest rates. Will there be a reduction?

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The President of the National Bank of Poland, Adam Glapiński, said at a conference on Thursday that by the end of the year there will be no majority in the Monetary Policy Council either for increases or reductions in interest rates. The speech of the head of the central bank shows that interest rates will most likely remain unchanged until the end of the year, analysts point out. Some believe that they may not change in 2025 either.

– I would risk such a thesis. I don’t see any prospects for a majority to be in favor lowering interest rates, if all data develops as we expect by the end of the year. There may be some votes in the council in favor of reductions, but I do not expect it to be a majority, said the president of the National Bank of Poland at a press conference on Thursday.

Adam Glapiński pointed out that there is uncertainty in the markets. – It is so large that we make decisions from meeting to meeting (RPP – ed.). There are no reasons to change any parameters, he said.

The president of the central bank admitted that the current interest rates are high and positive, although at the same time “they freeze, they keep an eye on this inflation.” He added that inflation the base level is still above 6%. – She’s falling, but she’s falling slowly. We would not like to disturb this decline, noted the head of the NBP.

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The Monetary Policy Council did not change the NBP interest rates at the meeting that ended on Wednesday. The main, reference rate is still 5.75%.

Analyst comments

“This is almost an official announcement by the President of the National Bank of Poland – the NBP rates will remain unchanged until the end of the year, because there will be no majority for cuts and increases. With such a reaction function and the trajectories of GDP and inflation, it is difficult to imagine that there will be a desire for cuts in 2025.” – wrote Bank Pekao analysts.

“At the beginning of the year, we decided to change our interest rate forecasts. The MPC’s hawkish turn, the reactivation of the projection as an important guide for the MPC and the expected trajectory of inflation and economic growth (suggesting the rapid closing of the window for rate cuts) are arguments for expecting unchanged rates by the end of 2024 and 2025. The risk of cuts is only due to possible excessive appreciation of the zloty,” they added.

“We have this: the president has just said that nothing will most likely change with rates by the end of the year. There is a lot of room for a change of views… and consensus. We still say: no changes,” mBank economists wrote in their comments.

“In terms of risk factors: 1) maybe the government will not remove the shields and the economic situation will be weak – then rates will probably drop. 2) J. Tyrowicz’s proposals for large increases will suddenly gain support,” they added.

“The most important conclusion from the NBP conference: rates will remain unchanged until the end of the year. We also drew this conclusion from yesterday’s statement. Until recently, according to NBP, Poland was the leader in disinflation, but the world is changing” – this is the comment of ING analysts.

Main photo source: Shutterstock



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