The Monetary Policy Council (MPC) has lowered interest rates again by 25bps across the board, which was a decision in line with the expectations of the vast majority of bank economists. It explained in its press release that in its view, incoming data point to weaker than expected economic growth in Poland and a stronger - than forecasted in the March projection - decline in inflation. At the same time, uncertainty about the scale and timing of the expected economic recovery in the euro area persists, which can adversely affect economic activity in Poland, central bankers argued.

The last paragraphs of the release - often underlined by both central bankers at their press conference and - analysts afterwards - reads: "The Council assesses that monetary policy easing conducted since November 2012 supports economic recovery and limits the risk of inflation running below the NBP target in the medium term." They pointed to the lack of the last sentence that features in the May release, namely: "The Council's decisions in the coming months will depend on the assessment of the incoming data with regard to probability of inflation remaining markedly below the NBP target in the medium term."

Indeed, governor of the National Bank of Poland (NBP) and MPC chairman Marek Belka said the wording of the last paragraph should not be interpreted as a signal that the policy loosening cycle has ended; quote the opposite - he openly said that this is not the case. At the same time, he did admit that we are approaching the time when the level of interest rates will be adequate to the current phase of the economic cycle. Belka pledged that MPC will deliver a more clear-cut statement next month, when NBP's new CPI/ GDP projection will be published.

These statements triggered a further depreciation of the zloty (though Belka said during the conference that MPC was not concerned with the zloty's recent weakening as it did not result from any internal factors) as market players began to realise that July may actually bring the closure of the easing cycle.

Belka also said that inflation may ease even further in coming months than April's 0.8% y/y, but he sees no risk of a deflation in annual terms. At the same time, he stressed that economic growth will probably continue to be weak in Q2 of 2013 and may not differ much from 0.5% y/y posted in Q1 of 2013.