# occur comment economist #
08.10. Warsaw (PAP) – If the price increase will continue to deviate from the inflation target, the Monetary Policy Council does not rule out further monetary policy adjustments – according to the MPC statement, which on Wednesday lowered its key interest per cent. by 50 basis points to 2 percent. per year.
Lombard rate was cut by 100 basis points – to 3.00 per cent., The deposit rate remained unchanged at 1.00 percent., And the rediscount rate was lowered by 50 basis points to 2.25 percent.
“The Council does not rule out further monetary policy adjustments, if the incoming information, including the November projection (inflation – PAP), confirm a significant risk of inflation remaining below target in the medium term” – said in a statement after the Council meeting Wednesday .
It added that, in the opinion of the Monetary Policy Council released data indicate a slowdown in economic activity and increase the risk of maintaining the medium-term inflation below the NBP, which is 2.5 per cent. (+/- 1 percentage point.).
“In Poland, data on activity in the third quarter indicate a further slowdown in economic growth. Indicated by a slowdown in industrial production, construction and assembly output and retail sales in recent months. Slowdown in the growth of economic activity is also indicated by the decrease in economic indicators “- said the Council.
At a press conference after a meeting of the President of the National Bank of Poland Marek Belka noted that “the consumer price index (inflation – PAP) will be negative for a few months.” “We hope that soon the price index will return to positive territory,” – he stressed.
The scale of Wednesday’s cuts NBP surprised many economists; 18 of 21 surveyed earlier by PAP experts were of the opinion that the MPC in October cut rates by 25 basis points., And only three economists expected a rate cut of 50 basis points.
beam pointed at a press conference that members of the MPC, opting for such a significant reduction, they wanted to “concentrate decision time.” He admitted that this decision was not unanimous.
“As far as the scale of the reduction of the reference rate is not – as it usually was – by 25 basis points, but with 50 points, clearly I want to say that this was not a unanimous decision, but those who voted for the correction , thought that it should be focused in time “- said Belka.
He added that a possible monetary easing cycle should be as short as possible.
In addition, according to the beams, the MPC’s decision was expected by the market, as evidenced by the reaction rate. “The zloty practically did not react to our interest rate cut, which means that the market expected this” – he said.
The head of the central bank also referred to a reduction of 100 basis points of the lombard rate, which is the basis for calculating the maximum interest rates on cash loans and credit cards. According to economists, this decision the Council wanted to support private consumption, which would stimulate the growth of the Polish economy.
Beam explained that the reduction in the difference between interest: reference, Lombard and deposit due to the desire to preserve the balance between them. Inquired by journalists whether this decision will not tighten the criteria for the granting of consumer credit and simultaneous outflow of customers to parabanków stated that is not afraid of it.
“These loans bear interest in Poland are very high, much higher than in the country to which we can compare in this case, namely in Hungary. Do not think that our banks have a problem with profitability” – said .
“I do not think also that did not yield cope in these new conditions. If the result is an increase in demand for consumer credit and can finally flow of parabanków and other organizations lending money to the banks, the banks, expanding the volume of these loans, can increase its profitability “- added Beam.
He also stressed that believes that our banks are very well managed and very profitable. “I do not believe that this could have a negative impact on the volume of consumer credit and the demand” – he said.
Deputy Finance Minister Janusz Cichon, assessing in an interview with PAP Wednesday’s decision of the Council stated that it expected to receive at least the cuts. “It is a change that goes in the desired direction, in line with our expectations” – he said.
“The reduction in interest rates will not work overnight, but it can be a stimulus to the economy in the long run” – he added.
MPC kept the interest rates unchanged since July 2013., When cut by 25 basis points ended started in November 2012. Cycle of monetary easing, which amounted to a total of 225 basis points.
In the opinion of economists Millennium Bank, NBP chief speech at the conference may suggest that he was not a supporter of the decision and could be outvoted. They added that the November MPC meeting may be cut by 25 basis points. “Currently, the Council is, however, most inclined to vote on rate cut by an additional 50 basis points, even without the support of the President Marek Belka” – Millennium economists wrote in a comment.
They added that the reference rate should not fall below 1.50 percent.
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