The March Monetary Policy Council meeting regarding interest rates will be the third one this year. Economists unanimously predict that we should not expect any changes but rather a maintenance of the reference rate. The meeting, however, will be different from the previous ones because the decisions made by the Council will be based on their understanding of the latest inflation projection by the National Bank of Poland. However, one must not forget the uncertainty of fiscal policy and pressure on maintaining the current anti-inflationary shields. Commenting was expert Tomasz Gessner, chief analyst of Tavex Company.
We are facing another meeting of the Monetary Policy Council. What makes it different from its predecessors is that the Council’s decisions will be based on the understanding of the latest inflation projection by the National Bank of Poland. For many months now, the inflation has been systematically coming down to lower levels, currently leaning towards the upper range of deviations from the target. Let’s recall that the inflation target in Poland is 2.5%, with an acceptable deviation of +/- 1 percentage point. Meanwhile, the last CPI inflation reading for January is 3.9%.
The cooling of inflation and the real positive rates that have been in place for several months could, therefore, favor considering a scenario for interest rate cuts. However, we must remember that the Council will be making its decision amidst the uncertainty associated with the shape of fiscal policy and pressure on the fate of the currently maintained anti-inflationary shields. If these were to be removed after the heating season, the pressure for energy and food price increases would probably reactivate in the second half of the year, and the MPC has to take that risk into account in today’s discussion.
The stable level of WIBOR indicators may also signal that financial market investors do not price any change in the cost of money at the current meeting. Its maintenance is also the consensus of the majority of banking institutions’ analytical departments. The current reference rate is 5.75%.
One of the elements influencing interest rates in Poland is also the decisions of the monetary authorities of the most important central banks, with a focus on the US Federal Reserve. Due to emerging signals of renewed activation of inflationary pressure across the ocean, the moment for the first interest rate cut is being pushed back in time. Just a few weeks ago, the consensus assumed a possibility of making such a decision at the meeting scheduled for March 20. Currently, market estimates for the first rate cut across the ocean have shifted towards the June meeting, which also gives the Monetary Policy Council a little more room to leave the rates at an unchanged level.
Tomorrow’s conference of the President of the National Bank of Poland will likely shed much more light on the further prospects for interest rates. He will likely refer to inflation projections at the conference, and probably a new wave of forecasts concerning the level of interest rates for the rest of this year will start.
