Polish MPC keeps rates on hold in August

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