The decision by the Monetary Policy Council to keep interest rates at the same level during the February meeting comes as no surprise. Furthermore, comments from the head of the National Bank of Poland (NBP) Adam Glapiński on the decision do not suggest that this situation will change in the near future. His statements regarding rate cuts had an impact on the EUR/PLN exchange rate.
At the press conference, NBP President Adam Glapiński emphasized uncertainty in future prospects, pointing out that the central bank remains dependent on data, making decisions meeting by meeting. He underlined that for the bank, the core inflation rate is key, while also placing significant emphasis on regulated prices. The extent of their changes, as yet undetermined, constitutes one of the key elements determining the inflationary landscape in the second half of the year.
During the press conference, Glapiński’s assessment, according to which the majority of the Monetary Policy Council will not opt for reducing interest rates this year, attracted the most attention. He later mildly modified his statement, emphasizing that it was his personal opinion. Asked further, he added that he does not foresee an increase in interest rates. His comment on reductions, however, resonated in the currency market.
The EUR/PLN exchange rate, which started at the level of 4.34 in the morning, dropped to 4.31 during the press conference, going in hand with limiting market valuations concerning interest rate cuts. The market sees fewer and fewer chances for several cuts in interest rates this year, which is a factor that strengthens the Polish currency. We still believe that by the end of 2024, the rates may be somewhat lower, but the chances for any significant adjustment in terms of the cost of money seem to be diminishing. This is good news for the Zloty.
Author: Roman Ziruk – Senior Analyst at Ebury
