MPC completed a series of reductions, increases are expected in 2016 … – Virtual Poland

Warsaw, 04.03.2015 (ISBnews) – The Monetary Policy Council (MPC) cut interest rates by 50 basis points – to 1.50% for the main reference rate. According to analysts, this year we should not expect a further easing of monetary policy, although the Council may be closely monitoring the level of the exchange rate.

Council both in its statement after the meeting, as well as during a press conference emphasized that this decision means the closure of monetary easing cycle. According to analysts, the following year only to be expected of any increases in interest rates. Wednesday’s decision motivated by, among others, the desire to lead the activities carried out by the European C entral Bank (ECB) only for a moment caused stronger weakening of the zloty. In the afternoon, the gold again began to gain in value.

According to analysts, today’s decision will not significantly weakening of the zloty in the coming months. Therefore, among others, The Council will closely monitor the situation on the market. Deterrent to a possible influx of speculative capital on the domestic market still remains tense situation in Eastern Europe and Greece.

Here are the most interesting quotes from economists:

“Cutting feet in March, so it was probably the last changes in interest by the current MPC. So we can say that the adjustment of interest rates ended the MPC przytupem” – Millennium Bank analysts

“We believe that today’s decision does not deter from the Polish capital hot, and can only lead to growing imbalances in the economy at a time when domestic demand is growing at a rate close to 5%” – economist Plus Rafal Bank Sadoch

“In the near future the central bank will be closely watching the zloty exchange rate, and its stabilization will mean stabilization of interest rates, because deflation should gradually decrease in the coming quarters” – chief economist at Deutsche Bank Poland Arkadiusz Krześniak

“We believe that the MPC will raise interest rates twice in 2016, in September and November, by 25 basis points” – senior economist at Bank Pekao Wojciech Matysiak

Here are the most interesting statements economists in extenso

“The Monetary Policy Council surprised rate cut by 50 basis points, while the market consensus predicted a reduction of a quarter of a percentage point. We also assumed that scenario and we expected the second reduction of 25 basis points in April. It seems that the MPC preferred to condense a series of cuts and in one motion to adjust to the new environment feet (deeper deflation) and new forecasts (NBP projection shows the increase in the CPI at 1% in 2016-2017). Prior to today’s decision FRA market was pricing cut by more than 50 basis points in 6 months, but we think that more cuts are no longer see. MPC statement clearly stated that the monetary easing cycle was closed and it was probably the last change in interest rates made by the MPC of the current term. Recall that at the beginning of 2016. An exchange of eight of nine members, and it is not certain whether the President of the NBP will be appointed for a second term. It seems to us that the swap cur ve is currently too low, taking into account the likely rebound in inflation and the continuation of strong domestic demand-led growth “- analysts BZ WBK

” What is interesting, cutting the cost of money in case of the revision GDP forecasts upwards. Recall only that IE has the November projection of the NBP pointed to economic growth above potential, except that the GDP forecast revised downwards, and interest rates were maintained at the same level. The main reason was the announcement of today’s decision by the ECB’s government bond purchase program of euro area countries and the associated fear of the appreciation of the zloty. As acknowledged at a news conference E. Chojna-Duch, whose voice could determine the cut in interest rates, the decision was adjusting domestic monetary policy to that pursued by other central banks, and the MPC did not want to be drastically different when it comes to monetary policy. We will only add that the conference was not essentially moved the topic of the current level of deflation, which indicates that it is not the main reason he was cutting the cost of money. In our o pinion, the impulse for the depreciation of the zloty associated with this decision will be small, which shows the strong appreciation of the Polish currency during the conference, which is today’s decision was against it. During the conference, the gold against the euro appreciated by almost 4 cents, and EURPLN decreased from 4.17 to 4.13. We believe that today’s decision does not deter from the Polish capital hot, and can only lead to growing imbalances in the economy at a time when domestic demand is growing at a rate close to 5% “- Raphael Bank economist Plus Sadoch

” In baseline scenario, we assume that the end of 2015 the MPC did not change interest rates. In our opinion, there is little risk of another rate cut in the event of a strong appreciation of the zloty (in the short term) or persistence of deflationary processes in the world (in the medium term), which, however, do not assume. We believe that the MPC will raise interest rates twice in 2016, in September and November, the 25 bp. According to our forecasts, the reference rate at the end of 2016 years will amount to 2.00%. We believe that there is a risk of past increases in interest rates in 2016. It is worth noting that the growth rate of inflation at the turn of 2015 and 2016 will be high due to the low base and at the beginning of next year inflation rate may exceed the reference rate. Such a situation may encourage the MPC to start a cycle of interest rate hikes, despite the fact that the CPI will was still clearly below the target “- senior economist at Bank Pekao Wojciech Matysiak

” Today’s deeper-than-expected interest rate cut exhausted, as message indicates the MPC and CEO M.Belki, space for monetary easing in Poland. The Council, having regard to the latest forecasts of GDP and CPI, whose path has been significantly revised downwards, acknowledged that the adjustment feet today should be a one-off and wanting to avoid an increase in market expectations for the next movement, made deeper cuts. The Communication also closed the door to further interest rate reductions. Monetary easing cycle has been completed, which means that the interest rates to the end of the year. (And most likely by the end of the term of office of the current MPC) will remain unchanged already. It should however be noted that in the past (eg. In March 2013 r.), It happened that the MPC to announce the end of the cycle of monetary policy easing, and further reductions followed. At present, it seems that the current easing of monetary policy has reached a scale th at the Council no longer expand. Risk factors for such a scenario, however, exist, and is the main developments in the global economy “- chief economist at Postbank Monika Jacket

” We assume that before us quite a long period of stability in interest rates on a new level, which will contribute to and gradual replacement of the current to the new (most of the changes will take place in January / February 2016.). In the baseline scenario, we assume that decisions about further changes (this time up) the cost of money will no longer take new MPC, but they will not occur earlier than the second half of 2016. Slight weakening of the zloty which took place just after the MPC decision has been lifted with a vengeance during the conference, after the announcement of the end of the cycle. Disappears the same uncertainty about the path of interest rates in Poland, which could inhibit the appreciation of the zloty in recent days, driven by expectations of capital inflows after start of QE in the euro area. As a result, after an unsuccessful breaking above the 4.18 EURPLN couple after hours. 16 fell below 4.14 – the lowest level since July last yea r The movement should continue in the short term with the first target at 4.12. In the long term potential for strong PLN brake geopolitical risk remains (Ukraine, Greece), and the specter of higher interest rates in the US “- analysts Raiffeisen Polbank

” The expectations for the future is crucial penultimate sentence of the message, in which the MPC states that the decision to cut interest rates at this meeting is the closure of monetary easing cycle. This sentence does not require additional comment. In the coming months, we should expect the stabilization of the monetary policy parameters. He stressed also the president of Beam at the conference after a meeting of the MPC, who does not see room for further reductions. Rate cut in March, so it was probably the last changes in interest by the current MPC. So we can say that the adjustment of interest rates ended the MPC przytupem “- analysts Millennium

” Today’s Council decision to cut was deeper than expected and probably was due to stronger-than-expected reduction in the inflation path in the new NBP projection. It means that the MPC sees the need for a stronger reduction in the cost of credit, despite the continued GDP growth at a relatively stable level. Impact on today’s decision of the Council was probably also the fact that the strengthening of the zloty against the euro and the CHF, which reduced the risk to the household sector (and will stabilize consumption in the medium term). In the first reaction to the decision of the MPC zloty weakened against the euro by 0.2%. The subsequent behavior of gold will depend on the MPC statement, which probably will signal that the MPC considers the current level of interest for target (until the coming of the new data). Today’s decision is likely to maintain the MPC interest rates unchanged in the next 2-3 months. In the near future the central bank w ill be closely watching the zloty exchange rate, and its stabilization will mean stabilization of interest rates, because deflation should gradually decrease in the coming quarters. If, however, the gold will be strengthened (due to the interest rate differential with the euro zone and quantitative easing by the ECB), the MPC can re-adjust monetary policy (in the next 1-2 quarters) “- chief economist at Deutsche Bank Poland Arkadiusz Krześniak

(ISBnews)