Poland’s Monetary Policy Council (MPC) held rates at 1.5% as expected at its meeting on June 8. In what has become routine of recent months, rate setters – who met for the last time under leadership of central bank governor Marek Belka - maintained their stance of recent months that there is little pressure for a return to easing, despite the weak first quarter economic growth reported since the last meeting.

While Polish deflation remains stubbornly in place, the rate setters have been clear in recent months that they are unlikely to reduce the benchmark below the current historic low while economic growth strides onwards. While the MPC did note the weakening of growth in the first quarter, it says it remains convinced growth will pick up in the coming quarters.

At the press conference following the announcement of the decision, Belka said that while the council discussed different economic scenarios, they are not concerned about the country's economic outlook. He also admitted that a deterioration of financial results at Polish companies could make the MPC reconsider its stance on further easing, but noted no such trend is seen.

The MPC also maintained its position that the causes of deflation – primarily low oil and commodities prices – remain external and therefore monetary policy is largely ineffective. Poland’s CPI dropped 1% y/y in May, statistics office GUS said in a flash estimate on May 31, and is thought unlikely to approach the National Bank of Poland’s 2.5% target for the foreseeable future.

The statement following the meeting echoed that issued in May and April. The concluding line was an exact copy of the previous statement, saying “the council maintains its assessment that ... the current level of interest rates is conducive to keeping the Polish economy on the sustainable growth path."

The June 8 meeting of the council was the last one chaired by Belka, whose term ends in June. All other members of the MPC have been replaced by PiS this year, but analysts have been surprised somewhat by their opposition to further rate cuts, despite the stance of the government.

Belka’s replacement is unlikely to change that balance. Adam Glapinski, who is set to be confirmed in a parliamentary vote on June 10, has a long track record as a hawkish member of the MPC.