Although the new member of the Monetary policy council,
J. Czekaj, was sworn this morning, just in time to fill the
empty seat in the dovish wing of the council, the MPC decided to leave rates on hold. Intervention rate remains at 5.25%. Because the balance between doves and hawks was restored, the decision was up to the governor’s decisive
vote.
We believe that by leaving rates on hold, Balcerowicz
demonstrated his reluctance to bend to political pressure,
demonstrated by the “just in time” appointment of J. Czekaj.
We maintain our scenario of at least two more 25 bps cuts
until the end of this year.
At the conference, the MPC defended its decision by the
uncertainties stemming from the future fiscal policy, by the
outlook for increased fiscal deficit next year and by the
recovery in industry and investment activity. Balcerowicz
said that current interest rates are no barrier to recovery and
that he expected the growth to exceed 3% this year. The
government is to decide on next years budget in September.
Jakub Dvorak, Investment Research, CSOB