The Monetary policy council cut the intervention rate by 50 bps to 9.50% yesterday. The reasons given, why the cut amounted to mere 50 bps are as follows: the risk of too loose monetary policy and its influence on inflationary pro-cesses, the risk of rising oil prices, the slowdown of the pace of deposits, the second consecutive month of rising consumer credit and accelerating retail sales and faster than previously expected recovery in the USA and in the EMU. The lombard rate was cut by 100 bps to 12.50%, while the deposit rate remained unchanged at 6.5%. The narrower spread should help to improve the effectiveness of the transmission of official rate changes to the banks clients‘ rates.
The decision disappointed the market. The level of rates is inadequate to the situation of the economy. We believe, that given the outstanding inflationary outlook for coming months - we forecast that the CPI will stay be-low 3.5% y/y until September 2002 – another reduction of official rates until the end of the second quarter is unavoidable.
Konrad Soszynski, Kredyt Bank S.A. Warsaw
Jakub Dvorak, CSOB