Polish MPC agree on period of 'forward guidance' in its rate policy, hint at changes in July

By bne IntelliNews April 18, 2014

During their April sitting, member of the Monetary Policy Council (MPC) maintained their assessment that the interest rates should kept unchanged for a longer period of time, i.e. at least until the end of Q3 of 2014. The Council members observed that a more comprehensive assessment of a need to change the horizon of keeping the interest rates at the current level will probably be possible during the July meeting of the Council, when a new NBP projection will be presented, according to the sitting's "minutes."
The Council left the interest rates unchanged (since July of 2013) at the following levels: the reference rate at 2.50%, the lombard rate at 4.00%, the deposit rate at 1.00% and the rediscount rate at 2.75%.
While discussing inflationary processes, MPC members pointed to inflation remaining markedly below the NBP inflation target (of 2.5% y/y vs. March's 0.7% y/y), core inflation continuing at low levels, further decline in producer prices and low inflation expectations. Some Council members emphasised that the available forecasts pointed to a very slow increase in inflation and the absence of risks to price stability in the medium term.
In March, MPC set the deadline in the "forward guidance" at the end of Q3 of 2014 vs. earlier end of H1 of 2014.
During the press conference that followed MPC's April sitting, the Council's chairman and NBP governor Marek Belka said that MPC will modify its statement in July, when the central bank's new CPI/ GDP projection will be published. Until that time, the statement will not change, provided that nothing extraordinary happens, he added.
Bank economists now expect interest rates to remain flat most likely till Q1 of 2015.

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