Analysts: MPC cut rates only in March – Virtual Poland

Analysts: MPC cut rates only in March – Virtual Poland

MPC will not lower interest rates on 3 February starting a two-day meeting, will do so only in March – say analysts interviewed by PAP. A similar opinion dominates the market.

“It seems that if the rate will not be cut, and the MPC will refrain from such decision to the March meeting, when he knew the NBP inflation projections,” – said in an interview with PAP Simon Zajkowski of Brokerage mBank. “Then the decision will be supported by a new path for future inflation,” – he added.

The rate cut in February – in his opinion – MPC will not have sufficient arguments. The more that deflation, the main argument in favor of interest rate cuts, there is, according to all forecasts hold for the next few months – adds Zajkowski.

A similar view is presented in an interview with PAP Ignacy Morawski, chief economist at Bank of FDI. “I think that the MPC will not reduce foot now, because as of January did not happen anything like that those MPC members who voted against a reduction, they changed their mind,” – he said.

points out that confusion with the franc after the “Black Thursday” January 15 effects the rate of ambiguously. “This may lead to lower rates, but can also increase the risk premium. And by the financial turmoil MPC is less likely to move off your feet” – he says. “Frank does not play a key role here, and if you play it in the direction of not lower interest, according to statements by members of the council,” – he added.

The importance also should not have – according to analysts – the ECB’s decision of 22 January, buying government bonds of EU countries. “As long as it does not affect the rapid appreciation of the zloty, and is not affected, it is unlikely to have affected the decisions of the MPC” – noted Moravian.

The Commission also notes that recently we have to deal with conflicting signals, because on the one hand deepening deflation, on the other good economic data. This is yet another argument for the MPC to wait until March interest rate reductions, the more it will be in March inflation projection, which will probably prolonged deflationary tendencies. “They will then have a washer under the decision to cut rates,” – says Morawski.

Also, according to the latest consensus PAP in February MPC will leave interest rates left unchanged. It is believed that 20 of the 22 economists surveyed. Only two economists expect interest rate cuts by 25 bps. According to 14 of 22 economists MPC cut interest rates at its meeting in March – 12 economists think it will be cut by 25 basis points, 2 economists predicts a reduction in interest rates by 50 bps. 8 economists expect to leave the NBP interest rates unchanged at its March meeting.

Another argument is that if deflation lasts longer (in December stood at 1.0 percent. Yoy), there may be allegations that the Council does not implement its mandate under the Law on the National Bank of Poland ( maintain price stability, while supporting the government’s economic policy, as long as this does not constrain the basic objective of NBP) and adopts monetary policy (inflation target of 2.5 per cent. plus / minus 1 percentage point.).

Simon Zajkowski also stresses that “in recent months will analyze what the MPC is even more difficult than it was.” “Whether the MPC will cut rates depend on the voice of one member of the MPC,” – he said.

It is probably referring to the position of Elizabeth Chojna-Duch, whose views are the least predictable. Another such member of the MPC is Jerzy Hausner. With the recent statements of both may indicate that in the near future, they can support a cautious rate cut, although it is difficult to say whether already at the next meeting of the Council.

Chojna-Duch said on TVN24 January 22 bis, that the events abroad less will affect the next MPC decisions, implying that the key issue is deflation.

“I think that to a lesser extent, what is happening abroad would be conducive to the moment our decisions. Deflation, very low inflation, minus 1.0 per cent., And the problem whether it will deepen due to declines in the prices of oil and other raw materials. What she has reason listing will look like when it comes to fall in food prices? ” – She said.

“That’s all we will analyze in February (…) and will certainly take optimal from the point of view of our decisions,” – she added.

On the other hand, Hausner said Jan. 21 in an interview with PAP that the phenomenon of prolonged deflation and odsuwający moment in time to achieve the objective of the NBP makes now in a more difficult situation the person that advance the arguments against a reduction in interest rates.

During the last January MPC voted for lowering only Andrzej Bratkowski. But recently he softened his stance. While previously argued for a one-time reduction in interest rates by 100 basis points, now believed to be better gradual reductions of 25 bp.

“So I still think that the most likely growth of GDP in 2015. Is 2.5% – 3%. That’s why I do not expect out of deflation before mid-2015 (and even that is not certain), or return inflation to the target in 2015. Such GDP growth and inflation continue to pose significant room for rate cuts. On the other hand, the strengthening of the franc strong increases nervousness in the market, which is not conducive to a large one-time change. But there is no reason to put off rate cuts because the Polish economy is more important than the zloty against the euro than for the franc. The recent decision of the ECB and the strengthening of the zloty in response to it indicate that the attitude of “wait and see” we can not afford it. So now I am in favor of interest rate cuts in small steps – by 25 basis points per month “- renowned journalist wrote on his blog.

Supporter gradual reductions are also Marek Belka, who, in public statements pointed out that too rapid reduction in interest rates could adversely affect the stability of the financial market in Poland.