Polish MPC holds rates for seventh straight month

Poland’s Monetary Policy Council stood by its continuing vow to hold rates to the end of its term, leaving Poland with it’s all time-low reference rate of 1.5% for the seventh month.

The policy decision, announced in a statement from the central bank, additionally kept the deposit rate at 0.50% and the Lombard rate at 2.50%, also record lows set in a 50 bps cut at the March sitting.

NBP chief Marek Belka will chair a briefing at 16:00 following publication of the monthly policy statement.

No other decision was or could have been expected; the council has stood unusually united since first issuing its rate hold collegiate rhetoric together with the March cuts. The market consensus shows no forecasts for any move until a new MPC is in office in 2016.

Minutes to the September sitting showed a council very broadly pleased with the domestic economy, but increasingly aware of risks abroad. Poland will most likely get more of what it has seen of late: inflation-free GDP growth close to recent levels, supported by a strong labor market.

The risk of a deeper than expected slowdown in China drew the most notable consideration as the “main risk factor for global growth” with kick-on effects just stretching to Poland. An unspecified group even sees increased risk of a “strong external shock” which could set Polish trading partners off track and spoil emerging market sentiment to boot.

Those risks to growth – and the lingering lack of any price pressures whatsoever – have not triggered any calls for interest rate cuts. Instead, the council remains divided between those sticking to the current bias and those mulling chance for rate hikes moving forward.

The market consensus has followed that lead, although forecasts for a hike in 2016 as the next move first crowded their way into Q4, then started to dwindle altogether. For the October survey, the first two forecasts for a first-move cut from the next council have appeared.

Month by month, views of the current council may merit less and less scrutiny, as eight of the council’s nine regular members end their terms early in 2016. Newly elected President Andrzej Duda will name two of the replacements. Each chamber of Polish Parliament will name three new members, presumably after the late October elections.

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