The zloty strengthened after the hawkish statement of the NBP president

Following a hawkish statement by NBP President Adam Glapiński that it was doubtful that the Monetary Policy Council would cut interest rates in June, the złoty strengthened against the euro and the dollar, and bond yields rose compared to morning levels.

In a speech on Thursday, NBP President Adam Glapiński said it was doubtful that the Monetary Policy Council would lower interest rates in June. He said that the position of the majority of the MPC indicates that autumn is key for rates.

Glapiński also said that adjusting interest rates does not mean the beginning of a cycle and nothing is certain . He also assessed that from the statements of MPC members one can conclude that if the Council decided to further reduce rates, either in July or in the autumn, the majority would support the cycle.

In his opinion, everything indicates that inflation has already passed its peak, although it is still elevated. The fight for a permanent reduction in CPI has not been finished, there is uncertainty, among others, regarding energy prices. He assessed that core inflation is still persistent and too high and that the main pro-inflationary factor remains loose fiscal policy.

The NBP President also announced that the next MPC meeting will discuss the issue of mandatory reserves. The width of the interest rate corridor may also be discussed in June.

Economists assessed Thursday's statement by the NBP president as hawkish.

"President Adam Glapiński struck a hawkish tone today: the emphasis was placed more strongly than a month ago on the upward risks for inflation, yesterday's rate cut was (for now) a one-off adjustment, further cuts in July or autumn. Our forecast (-100 bps in total this year) remains unchanged," Pekao economists wrote on the X platform.

They added that "market valuations from before the meeting (-200 bps this year) look absurd - this is not a reversal of the game from 2021-22". "The MPC is showing once again that it can stop whenever it wants, regardless of market pressures," they pointed out.

mBank economists also reported on the X platform that "President Glapiński's statement sounds as if the MPC had just served up a +hawkish cut+. "The scenario for rate cuts outlined in April seemed more dovish. Currently, June is maybe 25 bps (but probably not), and probably only July or autumn" - they predict.

According to ING Bank Śląski economists, the next rate cut will probably take place in July.

"President Glapiński's press conference was in line with our monetary scenario. A pause in June and a transition to a cycle of rate cuts of 25 basis points. The next cut will probably be in July, after the inflation projection, and the next ones in the fall. The market expected and priced in too much, too quickly," wrote economists from ING Bank Śląski on the X platform.

PKO BP economists maintained their forecast that there will be two more cuts of 25 basis points this year – in the summer (July) and in the autumn (November).

After the NBP president's statement, the euro/zloty exchange rate plunged and fell by about 1.5 groszy within a few minutes. The dollar/zloty exchange rate was around the reference level just before Glapiński's speech, and after the conference began, it fell by about 1 groszy.

The Monetary Policy Council at its meeting on 6-7 May reduced all NBP interest rates by 50 basis points, including the reference rate to 5.25%. The decision was in line with market expectations.

Several European central banks also made decisions on interest rates.

The Bank of England cut its key interest rate by 25 basis points to 4.25 percent. Analysts surveyed by Bloomberg had expected the BoE to cut interest rates by 25 basis points.

In Sweden, the Riksbank left interest rates unchanged at 2.25 percent. The decision was in line with the expectations of most analysts surveyed by Bloomberg.

The central bank of Norway (Norges Bank) also left its benchmark deposit rate unchanged at 4.50 percent. (PAP)

pam/ ace/ mick/