The first central bank to meet following the European Central Bank's announcement of radical measures, Poland's Monetary Policy Council (MPC) was unmoved by their colleagues in Frankfurt. They left the benchmark interest rate on hold at 1.5% on March 11, and offered little hint that a return to easing could be on the cards. 

The decision to hold rates at the same level at which they have stood for 12 months March was in line with market expectations. However, the post announcement statement was surprisingly hawkish given the effect of the ECB cut on the zloty on March 10, and comments from Hungary - the other "hawk" in the region - the same day guiding that it is now ready to ease its benchmark of 1.35%.

On top of that, persistent deflation and signs of slight weakening in economic activity in Poland have some analysts still suggesting that a cut during 2016 is becoming slightly more likely. However, the MPC - with all but two members, including Governor Marek Belka, new - appears determined not to spook markets watching for more signs that the ruling Law and Justice (PiS) is applying pressure.

As in recent statements, the MPC noted inflationary pressure remains absent, but noted deflation is largely the result of falling global commodity prices, and therefore largely outside the remit of Polish policy. The board, despite its changed constitution, also continues to insist that a cut in rates could destabilise the economy.

"The MPC has decided to retain interest rates on an unchanged level, as in the context of available data and forecasts the rates’ current level is supportive of keeping the Polish economy on the path of sustainable growth and allows to retain macroeconomic balance," the MPC said, largely repeating a statement from the previous meeting. 

Belka offered no more than the merest hint that easing could be in the back of some minds. It is rational to hold on off on the benchmark in order to “retain ammunition” so as to be able to react if global economic situation suddenly deteriorates, the outgoing NBP head said.

That was not only despite the ECB action, but also a significant deterioration in the NBP's outlook on inflation. The central bank now forecasts consumer inflation will fall between -0.9% and 0.2% this year, a major change from the previous forecast of 0.4%-1.8%.

Poland’s consumer price index (CPI) fell 0.9% y/y on average in 2015 and 0.7 y/y in January, according to the statistical office. Still, at the same time, the NBP also expects GDP growth to come in at 3%-4.5% in 2016, an upward revision from the previous prediction of 2.3%-4.3%.

That has many analysts convinced that the new MPC will stand its ground against any pressure to cut. “Our basic scenario assumes leaving the interest rates at the current level,” Bank Millennium writes, pointing out that the rhetoric of the new MPC has not changed in comparison to the previous council.

Others, however, are not so sure, noting Belka's hint on "ammunition".

"We tend to think that the discussion on rates may come back later this year, especially if there are any signs of a ... slowdown, which cannot be ruled out, given the uncertainty about global growth and the weakening performance of the Eurozone," Erste writes.

Indeed, the markets appear to believe also that a cut is on the way, Capital Economics observes. "The financial markets don’t really seem to buy the MPC’s hints that rates will be left unchanged. They continue to price in a 25bp reduction in the policy rate this year. That's understandable to an extent given the backdrop of extremely weak inflation," William Jackson writes.