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The Monetary Policy Council begins its meeting. Will there be a decision to change interest rates?

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On Monday, June 5, a two-day meeting of the Monetary Policy Council begins. The market does not expect a change in interest rates. Investors’ attention will be focused on signals coming from the communiqué after the meeting of the Council and the conference of the President of the National Bank of Poland, Adam Glapiński.

The meeting of the Monetary Policy Council begins on Monday. The MPC last changed interest rates in September 2022 and has kept them unchanged since then. Main NBP interest ratethe reference rate, is 6.75 percent.

interest ratesPAP

“A month ago, after the first wave of the media offensive of some MPC members suggesting possible rate cuts after the holidays, we did not rule out that the MPC would decide to formally end the rate hike cycle. However, this did not happen, and the tone of President Glapiński’s speech at the conference was surprisingly not dovish We have stopped focusing on the statements of MPC representatives, considering that they introduce more confusion than clarity, Santander BP economists indicated in the report.

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“However, it must be admitted that since the May meeting of the MPC in the economic data there have been more signals favorable to the expectations of faster disinflation, including: lower than expected preliminary CPI reading for May, for the first time in a long time resulting from a slowdown inflation baseline, the collapse of domestic demand in the first quarter of this year, weak activity and signs of a rapid slowdown in costs in European industry,” they added.

Despite positive signs of interest rate cuts, there will be no interest rate cuts

Despite the positive data from the point of view of inflation processes, Santander BP economists predict that in 2023 there will be no conditions for interest rate cuts in Poland.

“In our opinion, however, the incoming data will be crucial for the Council’s decision. And in our opinion, these data will show that there will be no conditions for interest rate cuts this year – even if the CPI falls below 10% yoy before the end of this year, it will be slightly and still clearly persistent core inflation, in the conditions of a gradual economic recovery, a tense labor market and a dissolving sack with pre-election promises of spending, which will hinder the process of disinflation in the coming years, economists assessed.

“As a result, we invariably believe that the market valuation of NBP interest rate cuts is overly optimistic,” they added.

It is possible to change the rhetoric

– At the meeting starting on Monday, the Monetary Policy Council will not change interest rates – said ING BSK economist Adam Antoniak. However, a change in rhetoric is possible, he added. In May 2023, according to the flash estimate of the Central Statistical Office, inflation fell to 13 percent. from 14.7 percent in April this year According to the economist of ING BSK, this is a significant drop in inflation, which should result in a significant drop in core inflation (in April it fell by only 0.1 percentage point to 12.2%). – NBP President Adam Glapiński should note both a clear fall in inflation and the fact that we are also behind a turning point in core inflation. There may also be suggestions that interest rates will fall at the end of this year, said Adam Antoniak. However, in his opinion, the scale of inflation decline this year will not be high enough to justify a cut in interest rates. He stated that although inflation is currently falling fast, it will remain at an elevated level in the medium term. – I think that even the new inflation projection, which will be published in July, will not show a strong acceleration of disinflation in the medium term and its faster return to the NBP target. Inflation paths may change slightly due to energy pricesbut there will be no big change, said the ING BSK economist.

Main photo source: Paweł Supernak/PAP



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