Poland’s Monetary Policy Council (MPC) held its benchmark interest rate at a record-low 1.5% on November 4, in line with market expectations.

The decision comes as no surprise, with rate setters once again underlining stable economic growth and externally driven deflation. They labelled the recent deepening of deflation – which came in at 0.8% in October according to a flash estimate – as “minimal”.

Despite some expectations that the MPC would offer a somewhat dovish message during the press conference following the decision, the council’s head and the governor of the National Bank of Poland Marek Belka dismissed worries of deflation. Belka said deflation is gaining strength “minimally” and that there is little to justify a rate cut. 

Deflation has long been driven by external factors, mainly falling prices of commodities worldwide, which, combined with “moderate dynamics of wages” limits the risk of cost pressure rising, Belka said. 

The MPC’s projection is now that CPI will finish the year at -0.9% to -0.8% versus a July forecast of  -0.4% to -1.1%. Inflation is expected to accelerate in 2016, but within a range of 0.4%-1.8%, slightly slower than 0.7%-2.5% expected in July. Economic growth is also expected to expand at a slightly slower rate of 2.9%-3.9% in 2015, against 3%-4.3% from the July projection.

However, the governor was clear in saying that the MPC will leave any changes in monetary policy to the next council. Eight of the ten member panel will be replaced in January and February, while Belka’s term ends in June. Law and Justice (PiS), which won last month's election, is expected to appoint new board members that will support a return to easing.

“We’ll see what the situation will be like in the coming months, what the preferences of the next council will be," he said. "We’ll then look at monetary policy and whether there will be reasons to change it.”

“Nominations for the new MPC are in the hands of the [PiS] government and President [Andrzej] Duda. Law and Justice already announced that a dovish bias is going to be an important criterion for nomination," note analysts at Erste. PiS "already called for monetary easing, stating that there is space for another 50bp cut," they add.