The Monetary Policy Council cut rates by 50 bps today, in line with broad expectations. The 28-day intervention rate now stands at 7.50%. Despite some analysts’ expectations, the rate cut was not hampered by the controversial budget draft for 2003 proposed by minister of finance Kolodko last week. According to National bank of Poland press office, the Council will not comment on the next year’s budget, but they will instead wait for the official approval of the draft by the government.
Already the Monday media appearance of one of the hawkish members of the council, Boguslaw Grabowski - „…one must consider that rates were cut this year and may be possibly cut further. Nevertheless, we have high (budget) deficit and still the cuts do not translate into faster growth…“ - suggested that the Council will prefer the poor economy to the budget draft. Since a certain moment, MPC members have started to admitted that the latest results of industrial output and other indicators were worse than they had been expecting only a couple of months before. This makes us believe our forecast that one more cut by 50 bps will materialize in November this year.
Konrad Soszynski, Kredyt bank, S.A.
Jakub Dvorak, Investment research, CSOB