RPP keeps rates unchanged, may cut if deflation persists

The Monetary Policy Council (RPP) has decided, in line with expectations, to maintain interest rates unchanged after its two-day sitting on Tuesday and Wednesday. The NBP’s reference rate stands at 2.00 percent, the lombard rate at 3.00 percent, the deposit rate at 1.00 percent and the rediscount rate at 2.25 percent. “The main reason for keeping rates unchanged was likely the increased uncertainty on the currency market following SNB’s decision to float of the Swiss franc against the euro, which consequently weakened the złoty,” said Arkadiusz Krześniak, chief economist at Deutsche Bank Polska. “In order to lower rates, RPP will need more data indicating that the economic activity in Poland and in the euro zone (particularly in Germany) is weakening,” he added. The latest PMI and industrial output figures were well above expectations, and the economic indicators in Germany are improving. RPP president Marek Belka does not exclude a possible rate cut in the coming months. “The Council may adjust its policy in the near future if the expected period of deflation is extended,” Belka said.