The Monetary policy council cut all rates by 50 bps this morning, the intervention rate stands at 9.00%. The decision did not have any significant imminent impact on exchange rate nor on the bond market. Part of the market did expect the decision, the rest expected a cut by 100 bps to come in June.
Fortunately, the Council this time preferred the state of the economy to their game with the government. The need for further cut was shown by the latest weak retail sales and by falling core inflation indicators, that proved the lack of demand pressure in the economy. Additionally, the overall CPI should fall to 2.2% y/y in May. In June, we expect at least 50 bps, but more likely 100 bps cut.
(Jakub Dvorak, CSOB,
Konrad Soszynski, Kredytbank Warsawa, S.A.)