Poland's CPI to fall below 3.5 pct in coming months, hence decision to cut rates - MPC
In the assessment of Poland's Monetary Policy Council, in light of the available forecasts indicating that the CPI inflation in the coming months will fall below the upper bound for deviations of the NBP inflation target, it has become justified to adjust the level of the NBP interest rates by 25 basis points, the MPC said in the press release following the meeting held on July 1-2.
"According to the available forecasts, the CPI inflation in the coming months will fall below the upper bound for deviations of the NBP inflation target. Taking this into account, in the Council’s assessment, it became justified to adjust the level of the NBP interest rates," the MPC said in the press release.
The Council stated that its further decisions will depend on incoming information regarding prospects for inflation and economic activity.
"Fiscal policy stance, developments in demand pressure and situation in the labour market in subsequent quarters, as well as the level of administered energy prices, remain an uncertainty factor. Uncertainty stems also from inflation developments abroad, following, among others, from changes in trade policies of major economies," the MPC pointed out.
The MPC's release does not mention that the current level of interest rates is conducive to achieving the inflation target in the medium term, as stated in the previous statement.
The Council reiterated in July that Poland's central bank NBP will continue to take all necessary measures to ensure macroeconomic and financial stability, including, above all, a sustainable return of inflation to the Poland's central bank NBP's inflation target in the medium term. It added, as usual, that Poland's central bank NBP may intervene in the foreign exchange market.
According to the MPC, taking into account Poland's stats office GUS' preliminary data on CPI for June (4.1 percent year on year), it can be estimated that the last month's inflation, excluding food and energy prices, was also similar to that recorded in May, amid the growth of service prices remaining elevated.
"The earlier increases in the administered energy prices together with continuously heightened annual growth in prices of food and non-alcoholic beverages translate into still elevated level of CPI inflation," the Council assessed.
The MPC cut all Poland's central bank NBP interest rates by 25 basis points on Wednesday, including the reference rate to 5.00 percent, while the market expected rates to remain unchanged.
A press conference by Poland's central bank NBP governor Adam Glapinski will be held on Thursday, July 3, at 15:00 local time.
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