As expected, the Monetary Policy Council maintained the interest rates at the same level in September. The attention was focused on the rhetoric of President Glapiński, which affected the EUR/PLN exchange rate.
President Glapiński’s tone during the September press conference was relatively dovish. He stated that the discussion about lowering the rates could happen before the return of inflation to the target. In the context of the timeline for such a discussion, he mentioned the period after the second quarter, but he did not rule out an earlier date. According to him, the cut will be of a standard size, i.e., 25 bp (0.25 pp).
We interpret his statements as confirmation that indeed, the NBP President is starting to change his feathers at the end of the summer. Our belief that interest rates will be reduced in the coming year is increasing. The most likely dates for the first reduction, in our view, are March or July, which are the months when new NBP inflation forecasts are published. Much will, of course, depend on the inflation situation, but the fiscal situation and external environment will also matter.
Glapiński’s comments were reflected in the złoty exchange rate. The EUR/PLN pair headed upwards during his speech, approaching the level of 4.28 – the złoty lost gains from the earlier part of the day. However, the scale of changes is limited, probably due to the fact that Glapiński’s statements are merely a completion of his rhetoric’s shift that had already occurred earlier. What’s more, before the press conference, the valuations for interest rate cuts next year were quite aggressive (roughly 150 bp).
Author: Roman Ziruk – Senior Analyst Ebury
Source: https://ceo.com.pl/prezes-glapinski-zmienia-upierzenie-golebia-retoryka-oslabia-zlotego-51731
