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 July 25bps cut).
It also retained the wording of the key sentence of its press release as an "ostentatious repetition" of its stance, as governor of the National Bank of Poland (NBP) and MPC chairman Marek Belka put it. The sentence reads (exactly the same as in December): "The Council maintains its assessment that NBP interest rates should be kept unchanged at least until the end of the first half of 2014."
The Council also reiterated that gradual economic recovery is likely to continue in the coming quarters, however, inflationary pressures will remain subdued. At the same time, it again stressed that lowering interest rates in H1 of 2013 and keeping them unchanged in subsequent quarters supports recovery of the domestic economy, gradual return of inflation to the target and stabilisation in the financial markets.
Belka said that in order to change its current policy bias, MPC would have to see a clear-cut upswing of inflation. He stressed that low inflation and accelerating GDP growth may continue to co-exist, prompting no reaction from the monetary authorities. He acknowledged that the economic revival has been gaining momentum, but pointed out that the flash 2013 GDP data suggest that in Q4, net export continued to be the growth's driving force, which - according to Belka - is not a sustained growth factor.
After the publication of MPC's press release and press conference, bank economists stuck to their expectations that the first interest rate hike is possible no earlier than in September, even though March (with NBP's new CPI/ GDP projection) should provide more insight as for future monetary policy.