Immediately after the announcement of the Monetary Policy Council’s decision to leave interest rates at the current level, there were significant declines in the rates of the main currencies. The zloty strengthened against the euro, dollar and franc.
After a two-day meeting, the Monetary Policy Council (MPC) decided to keep interest rates at the current level. Therefore, the main reference is 5.75%. on an annual basis. Let us recall that in September and October the Monetary Policy Council made cuts by 75 and 25 basis points, respectively.
The MPC’s decision strengthened the zloty
Today’s decision of the Council surprised the markets, as another interest rate cut was expected. Immediately after the Monetary Policy Council announced its decision, there were significant declines in the exchange rates of the main currencies, while the zloty strengthened.
As Business Insider Polska notes, investors paid PLN 4.46 for the euro just before the Monetary Policy Council’s decision. A quarter of an hour later, the exchange rate dropped to approximately PLN 4.43. In the case of the dollar and the franc, the scale of the change is similar (they fell to PLN 4.15 and PLN 4.61, respectively).
– Start of a cycle of reductions after a year of maintaining the reference rate at the highest level in two decades, 6.75%. a sharp move of 75 bp led to sharp increases in currency rates. In October, after a change of 25 bp, relief was visible that no further aggressive step had been taken. After the first post-election collapse, the euro exchange rate found balance within a few groszy range below PLN 4.50. After keeping interest rates at the current level, the zloty is clearly gaining. After the decision, the euro exchange rate quickly dropped by about 3 groszy, to PLN 4.43. EUR/PLN quotations are again separated by less than 1%. from this year’s minimum – comments Bartosz Sawicki, currency expert at cinkciarz.pl.
When will the next interest rate cut be?
The expert predicts that in December interest rates “will probably also remain unchanged, and a possible return to reductions will be possible at the end of the first quarter of 2024.”
Economist Marek Zuber believes that interest rate cuts should wait until the middle of next year. – I would wait until the end of the first half of 2024 to see if inflation starts to rebound. Our reference rate is 5.75%. and if inflation was at 6%, this rate is absolutely not too high – explains Zuber in an interview with Wprost.pl.
– I would refrain from reducing interest rates for at least six months, unless something happens that would reduce inflation well below 5%, close to the inflation target – he adds.