The National Bank of Poland’s Monetary Policy Council (MPC) is likely to maintain the key interest rate at 1.5 percent during its meeting on Wednesday. The MPC is expected to keep the rate at this level for the rest of 2016, said Societe Generale in a research report. This will be the last MPC meeting under Governor Marek Belka’s leadership. The new governor may begin talks on new monetary tools and cutting the required reserve rate because of a sharp deceleration in investment in the first quarter of 2016.
According to Belka, keeping the rate at 1.5 percent still leaves the central bank with a war chest to react if required. Most of the council’s members probably share the same view that an additional reduction in rates might not produce lower borrowing costs for longer-term treasury bonds and businesses. Beginning from mid-June, Adam Glapinski will replace the central bank head. Glapinski has been a wary and moderate MPC member and is likely that he, along with the MPC, will add additional tools in its Monetary Policy Guidelines.
According to an MPC member Eugeniusz Gatnar, the retail sales and industrial output data for April affirms that the key interest rate is at “optimal” level. The rates are likely to remain stable until the end of this year. The MPC, in its latest minutes had affirmed its assessment that the interest rate stability has aided in maintaining a sustainable growth path and keeping macroeconomic balance.
Certain members suggested that the impact of interest rates on financial stability should be taken into account, bringing the focus to increased volatility in domestic financial markets. The MPC ascertained that the heightened uncertainty about external and domestic developments also favored stable rates.
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