The Monetary Policy Council (MPC) has kept interest rates unchanged at the two-day meeting that ended today, according to the National Bank of Poland's (NBP) press release. Thus, the key reference rate is still 3.25%. The decision is in line with market expectations.

In its press release, MPC has omitted last month's statement that "In the opinion of the Council, considerable monetary policy easing in recent months and at the March meeting will allow inflation to run close to target in the medium term and at the same time supports recovery of the Polish economy." It replaced it with the following statement: "The Council's decisions in the following months will depend on the assessment of the incoming data with regard to the probability of inflation remaining markedly below the NBP inflation target and regarding economic activity."

MPC also pointed to a number of signals that confirms a weak demand pressure prevailing in the economy and said that incoming data confirm low economic growth in Poland as well as no wage and inflationary pressures. NBP governor and MPC chairman Marek Belka said that there are no reasons to change the expectations concerning GDP growth as assumed in last month's CPI/ FGDP projection of NBP.

As for inflation, Belka said that only if consumer inflation stays below 1.0% y/y for a longer period (compared to NBP's target of 2.5% +/- 1pp), MPC would consider relaunching its policy loosening cycle. Bank economists expect inflation to continue to decelerate to below 1.0% in April-June vs. February's 1.3% y/y.

After MPC cut interest rates by 50bps in March (when a 25bps move was expected), NBP governor and MPC chairman Belka said that this move was the final step in the loosening cycle (similar was the message of MPC's press release). However, later, he did not rule out more cuts, if Poland's economy reaches a significantly worse state than anticipated in NBP's new projection. Indeed, bank economists continue to be divided as to whether we should expect more interest rate cuts this year. Some of them believe MPC will lower the rates again at least once, but not before June.