As expected, Poland’s Monetary Policy Council (RPP) decided to implement the first interest rate cut of the year. While such a move would not have been surprising just a few days earlier, financial markets rapidly scaled back their expectations for a rate cut on the eve of the meeting due to the escalating situation in the Middle East. The surge in energy commodity prices raised concerns about the potential implications for inflation.
Part of the justification for the rate cut may have been the deterioration in macroeconomic data observed in January. However, in the case of the industrial sector, the weaker figures were partly the result of much poorer weather conditions than those seen a year earlier. Analysts also noted the significantly slower wage growth compared with December, which had previously been considered one of the key pro-inflationary risks. Inflation itself has remained largely under control in recent months, with both headline and core measures hovering close to the midpoint of the central bank’s target range.
Despite a modest sell-off of the Polish złoty following the decision, the EUR/PLN exchange rate remains nearly 0.5% lower than at the opening of the European trading session. The Polish currency is moving in line with other emerging market currencies, which are benefiting from an improvement in global risk sentiment during Wednesday’s trading. Reports suggesting that Iranian agents may be open to negotiating a ceasefire have also contributed to the more positive market mood.
Following the decision, the central bank is set to release its full statement along with the latest macroeconomic projections, scheduled for publication at 4:00 p.m.
However, the press conference by NBP Governor Adam Glapiński on Thursday is expected to have the greatest potential to trigger additional market volatility. Since further monetary easing is likely to remain very limited—probably only one more rate cut this year—markets do not expect particularly dovish signals from the central bank. Recent concerns about developments in Iran may also encourage the governor to adopt a more cautious tone.
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Source:
https://ceo.com.pl/geopolityka-nie-zatrzymala-rpp-pierwsze-ciecie-stop-w-tym-roku-62929
