Poland, Policy rate (Nov): 4.50%
Previous (Oct): 4.75%
Consensus: 4.50%, KBCS forecast: 4.50%
Polish MPC cut interest rates by 25bp, in line with consensus and our forecast. We expect another 25bp rate cut in December, after 3Q12 GDP print (to be released on Nov. 30th) confirms continued economic slowdown. We still look for 100bp of rate reductions in this easing cycle, taking the reference rate down to 3.75% by the end of 1Q13. Today’s rate cut decision was supported by a series of weak macro data released since the last MPC meeting. Moreover, although headline inflation remains well above target, it is likely CPI will fall significantly in the upcoming months and return to the target in 1H13. The MPC already said last month that it would cut rates provided the incoming data - including the new projection - confirmed economic slowdown, while the risk of increase in inflationary pressure remained limited. The MPC statement and press conference scheduled for 4:00pm CET will give more insight into the Council's reasoning. The MPC decision was probably additionally supported by the new NBP projection (the central path of the projection will be presented in the afternoon's statement). We expect the projection to underline inflation falling to the target by around 1Q13 and point to slower GDP growth compared to July’s forecast (in July NBP projected GDP growth at 3.0% in 2012 and 2.1% in 2013). The zloty remains stable after the MPC decision, at 4.1150/EUR at 2:05pm CET, somewhat stronger than 4.1240/EUR seen at yesterday’s closing.