Polish MPC keeps rates flat as expected, again hints at forward guidance revision in July

By bne IntelliNews May 8, 2014

The Monetary Policy Council (MPC) has decided to keep interest rates unchanged, which is a decision in line with the expectations of all bank economists. Thus, the key reference rate is still 2.50% (after the 25bps cut in July of 2013). It also retained the wording of its regular press release's crucial sentence: "In the Council’s assessment NBP interest rates should be kept unchanged for a longer period of time, i.e. at least until the end of Q3 of 2014" Until March, it spokes of the end of the first half of 2014 in this context.
During a press conference following the MPC sitting, the Council's chairman and NBP governor Marek Belka upheld that MPC could modify its statement in July, when the central bank's new CPI/ GDP projection will be published. He went on to say that at an unspecified larer date, MPC could change the mode of its communications with the market.
The Council also upheld its view that data on domestic economic activity confirm a continuation of the gradual recovery in Poland. In March, industrial output and retail sales continued to rise, yet slower than expected. At the same time, construction and assembly output picked up, it noted. Gradual acceleration in economic activity is accompanied by moderate lending growth, both to firms and households, MPC added.
As for inflationary developments, MPC pointed out that in March, CPI inflation amounted to 0.7%, thus remaining markedly below the NBP inflation target of 2.5%. Core inflation also remained low, and producer prices continued to fall. This was accompanied by low inflation expectations.
 

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