- The Polish central bank (NBP) decided to keep its key rate unchanged at 3.50% at today’s monetary policy setting meeting, which was in line with our and consensus expectation.
- There will be news briefing at 16:00 (CEST), explaining why the Monetary Policy Council (RPP) decided to keep interest rates on hold.
The decision to keep rates flat was expected by most market participants. However, the NBP governor Slawomir Skrzypek reiterated recently that the Polish central bank was still on an easing bias. Our “simulation” of the interest rate path for Polish interest rates - based on an augmented Taylor function – shows there is still some room for lowering rates in the beginning of 2010, but the latest inflation, wage and retail sales data (July’s retail sales beat all forecasts by growing 5.7% y/y) are slowly closing the window for any further monetary easing. The Q2 GDP figures due for release this Friday will play an important role in our decision whether we will revise our forecast for Polish interest rates or not. We are interested in NBP’s comments at the press conference later today, especially whether it will continue its easing bias.
The reaction on the Polish FX and fixed income markets was very limited as the decision of unchanged interest rates was broadly expected. However, NBP’s comments at the press conference might push rates higher if it signals that monetary easing might be over.
