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Predictable Monetary Policy Council Meeting Does Little to Affect PLN

ECONOMYPredictable Monetary Policy Council Meeting Does Little to Affect PLN

The Council was painfully predictable this time, with no impact on the national currency. President Glapiński’s press conference is in the spotlight. The exchange rate of the world’s main currency pair remains directionless, awaiting catalysts for change.

It had to be this way

The end of the year in our country showed another decrease in CPI inflation for December to 6.1% year on year, yet none of the questioned analysts anticipated any changes in interest rates at yesterday’s Monetary Policy Council meeting. It did indeed happen that way, with the Council maintaining the current cost of money unchanged for the third consecutive meeting. Admittedly, this decision is fully justified, and there is still a possible change in power in Poland and its fiscal consequences, as well as the impact of other protective measures on inflation. Moreover, the budget for 2024 has not yet been passed. Since the Council was predictable, it couldn’t affect the PLN, and we see this scenario playing out, with exchange rates to major currencies stabilizing, especially EUR/PLN, which is drifting around the temporary equilibrium point, i.e. the 4.35 level.

It’s time to shine

Today, the focus of the domestic market will remain on the press conference of the head of the Monetary Policy Council. Professor Glapiński is likely to take advantage of the moment and jab at the new government, highlighting the even more inflated 2024 budget than under the PiS administration. Putting aside political animosities, which really should not be the case for central bankers, we are unlikely to hear the term interest rate cut in Poland. We will only know the new projections in March, but whether this will mean a cut in the cost of money, we don’t know. Analysts are also deeply divided on this issue, some believe that there will be at least a 100 basis point drop in rates this year, while there are others (including myself) who believe we may only see a single 25 basis point move, and only at the end of the year. Anyway, there is a 180-degree change in the impact of monetary policy on the PLN, with the Council’s restrictive stance now becoming an asset and possibly positively impacting the zloty’s performance in the rest of the year.

We’re waiting for decisions

On the broader market, there is still a lack of resolution in EUR/USD trading. The USD has been a bit stronger in recent days, but as long as it stays above the 1.0850 level, it doesn’t rule out the bullish scenario, and the latest moves can still be filed under the name of correction. The scenario of a lack direction in the coming days is plausible, given that the most important events, namely the ECB and Fed meetings, are not until the end of the month. Among the more significant events on the calendar we have tomorrow’s CPI and core inflation from the US and any discrepancies in readings from forecasts could cause more volatility in the popular “EUR/USD pair.”

Krzysztof Pawlak – currency dealer at

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