Consistently with the market expectation, the Monetary
Policy Council (MPC) decided to cut its key interest rates
by 25 bps today, regardless of current tension on the political scene. The intervention rate was cut to 6.00%.
In earlier statements by the dovish members of the Council, especially D.Rosati and W.Ziolkowska, a concern
prevailed that at present, it may be difficult to cut rates because of the depreciation of the zloty and the increasing
domestic and global political risk. Such arguments have
been probably raised by the most hawkish MPC members.
Nevertheless, according to the voting results from the January MPC meeting that were published yesterday, only two
of the ten Council members opposed the cut. It may prove
the gradual metamorphosis of few hawkish MPC members,
whose hearts are becoming more and more dovish.
The minister of finance Grzegorz Kolodko said the size of
the cut was not a surprise. He added that he did not expect a
deeper rate cuts in coming months, although there was rationale for them. MPC Members Rosati and Ziolkowska
also support the view that there is still room for deeper rate
According to our baseline scenario, the negative inflation in
coming months may create both the room and the public
pressure for further sizeable reduction of interest rates. Also
the further monetary easing by ECB may push MPC in that
direction.We expect that till the end of 2003 the intervention rate will be reduced by 100 bps. The next cut should
come until May.
Wojtek Kurylek, Kredyt Bank S.A., Warsaw
Jakub Dvorak, Investment Research, CSOB