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.
However, during a press conference following the MPC sitting, the Council's chairman and NBP governor Marek Belka said that MPC will modify its statement in July, when the central bank's new CPI/ GDP projection will be published. Until that time, the statement will not change, provided that nothing extraordinary happens, he added.
The Council also upheld its view that gradual economic recovery is likely to continue in the coming quarters, however, inflationary pressures will remain subdued. In February of 2014, CPI inflation amounted to 0.7% (vs. 0.5% y/y in January), thus remaining markedly below the NBP inflation target of 2.5%. Core inflation also continued at a low level. At the same, time producer prices declined further. This was accompanied by low inflation expectations, MPC also noted.
Bank economists now expect interest rates to remain flat most likely till Q1 of 2015.