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Conference following the October meeting of the Monetary Policy Council

Date: 08-10-2014

At its October meeting, the Monetary Policy Council decided to lower the NBP interest rates.

The Monetary Policy Council, which held a meeting on 7 and 8 October, decided to lower the NBP interest rates. Thus, the reference rate was reduced by 50 basis points to 2.00%, the lombard rate by 100 basis points to 3.00%, and the rediscount rate by 50 basis points to 2.25%. The discount rate remained unchanged and continues at 1.00%. The Council also decided that required reserve holdings will be remunerated at 0.9 of the NBP reference rate.

I wish to state explicitly that the decision was not unanimous. Those of MPC Members who voted for the cut believed that cuts should be concentrated in time”, said Professor Marek Belka during the press conference after the MPC meeting. Asked why the Council opted for the uneven, “asymmetric” interest rate cuts, the President of NBP explained: “The symmetry was maintained because the spread between the rates remains the same and stands at 100 basis points.” In the opinion of Professor Belka the lowering of interest rates, in the current situation, by an equal value would bring the rates out of proportion to each other. “We want all three rates to be in the same territory” – he added.

The topic of deflation resurfaced at the conference. – “We have been certain for quite a time that the rate of inflation will continue at a very low level, at least in the foreseeable period. This is the reason why such a decision was made” said Professor Marek Belka. “The structure of the core inflation index is being monitored and it is not a cause for concern” – he added.

Asked about further interest rate cuts, the NBP President said: “We should made the decision reasonably quickly, if only to take pressure off the Treasury bonds market. Excessive expectations for interest rate cuts cause behaviour which is not necessarily positive.” He recalled a fragment of the press release issued by the MPC: “The Council does not rule out further adjustment of monetary policy, should the incoming data, including the November NBP projection, confirm a considerable risk of inflation remaining below the target in the medium term.”

The conference was attended, apart from the Chairman of the Council, by Andrzej Kaźmierczak and Anna Zielińska-Głębocka.

The next MPC meeting is scheduled to be held on 4-5 November 2014.

NBP interest rates

Reference rate 1.50
Lombard rate 2.50
Deposit rate 0.50
Rediscount rate 1.75

Exchange rates

Table of 2016-07-22
1 EUR4.3564
1 USD3.9504
1 CHF4.0072
1 GBP5.2066
100 JPY3.7180

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