RPP makes a bold move
Last week the RPP slashed its key interest rate by 50 basis points to five percent - the lowest level in history. The decision surprised most analysts, who had expected a more modest cut of 25 bp. The council also shifted its policy bias from "neutral" to "easing", implying that this isn't the last of the cuts. The sharp moves seem to indicate that the Council is concerned about the state of the Polish economy, after a recent spate of disappointing economic figures. Here's what economists had to say about the decision:
Jacek Wiśniewski, chief analyst at bank Pekao
"The decision shows the Council expects very weak economic growth. Such growth rates pose no risk to inflation, allowing them to cut rates to historically low levels."
Lars Christensen, senior emerging markets analyst at Danske Bank in Copenhagen
"This is aggressive. It's clear that they are really worried about the strength of the złoty and that the slowdown in growth seems to be dragging on. Given the lack of inflation pressures they had the room. They may yet be able to hold off and [not cut rates again]. But it shows that they will watch economic data closely and be willing to act aggressively if they see the slowdown is continuing to drag on."
Ryszard Petru, chief economist at Bank BPH
"This is a very sharp move, very positive for bond prices. The council wants to help economic growth, it is very concerned about that. The bias change shows that there are more rate cuts to follow and we expect further easing of at least 50 basis points by the end of this year."
Marcin Mróz, chief economist at SG Bank
"This decision means the Council is very pessimistic about the economic growth outlook and sees a moderate risk of inflation pressure. This looks like the first step towards further rate cuts. I expect that over the next two months there is a chance for further cuts by another 50 basis points." (Reuters)
Jacek Wiśniewski, chief analyst at bank Pekao
"The decision shows the Council expects very weak economic growth. Such growth rates pose no risk to inflation, allowing them to cut rates to historically low levels."
Lars Christensen, senior emerging markets analyst at Danske Bank in Copenhagen
"This is aggressive. It's clear that they are really worried about the strength of the złoty and that the slowdown in growth seems to be dragging on. Given the lack of inflation pressures they had the room. They may yet be able to hold off and [not cut rates again]. But it shows that they will watch economic data closely and be willing to act aggressively if they see the slowdown is continuing to drag on."
Ryszard Petru, chief economist at Bank BPH
"This is a very sharp move, very positive for bond prices. The council wants to help economic growth, it is very concerned about that. The bias change shows that there are more rate cuts to follow and we expect further easing of at least 50 basis points by the end of this year."
Marcin Mróz, chief economist at SG Bank
"This decision means the Council is very pessimistic about the economic growth outlook and sees a moderate risk of inflation pressure. This looks like the first step towards further rate cuts. I expect that over the next two months there is a chance for further cuts by another 50 basis points." (Reuters)
