The monetary policy council (MPC) left rates on hold today on its regular March meeting, as was expected. The 28-day intervention rate remained at 10.0%.
The reasons stated are not surprising either. The council shares cautious optimism regarding the signs of recovery in Poland, provoked by the last good figures on manufacturing, coupled with improving business climate, higher collection of corporate income tax, rising retail sales, improving prospect of the global economy and still not fully visible impact of recent monetary easing.
Another reasons against the cut were the rising money supply and cash in circulation, the slowing pace of household deposits and the loose budget. The assessment of inflation is, on the other hand, clearly positive. NBP president L.Balcerowicz expects the CPI to fall below 3.0% in May and to rise to only about 4.0% in December. Therefore, the decision to leave rates on hold is rather a tactical step, as the pressure on the MPC would be mounting anyway in the coming months. We expect a rate cut by 100 bps not later than in May, most probably in April.
Jakub Dvorak, CSOB