interest rates. What will the Monetary Policy Council do at its first meeting in 2024?

• The Monetary Policy Council is scheduled to announce its decision on interest rates on Tuesday, January 9.
• In their forecasts, economists unanimously point to maintaining the reference rate at 5.75%.
• There are many indications that the first moment the MPC might consider cutting interest rates will be in March, which will lead to new NBJ macroeconomic forecasts and perhaps also a temporary decline in inflation to the range of deviations from the inflation target.

“We don't expect that“The Board should adjust TNB interest rates at least until March,” economists at Millennium Bank succinctly comment on the matter in the morning market report.

“We believe it Interest rates will remain at their current levels (The reference rate is equal to 5.75 percent)” – this is the voice of economists from Credit Agricole.

“Ani consensus, Ani my country We do not expect any changes in interest rates” – This is how their colleagues from mBank write about the results of the January Monetary Policy Committee meeting.

Where does this consistency in the market come from? Above all The statement indicated that interest rates stabilized after the previous meeting of the Monetary Policy Council in Decemberwith the Council itself setting out the main arguments for its preservation The current situation in monetary policy. As experts from Credit Agricole said in the report, this represents “uncertainty about the shape of future fiscal and regulatory policy and its impact on inflation, as well as the adjustments made to the National Bank of Japan’s interest rates in previous months,” that is, the reduction in interest rates. The reference rate in September last year by a full 75 basis points, followed by another cut in October – by 25 basis points.

The scenario of keeping interest rates unchanged becomes more realistic in the context of the votes coming from the Monetary Policy Board itself. In an interview with PAP Biznes at the end of December, a member of this body, Irenius Dabrowski, assessed the following: The council should wait until March 2024. With decisions on interest rates, because then the latest macroeconomic forecasts of the National Bank of Japan regarding the path of inflation and GDP, as well as the shape of fiscal policy, will be known.

“It seems that at the moment – with market parameters not changing – there is not a big risk of raising interest rates. Rather, it is a choice between maintaining them or lowering them. But there is a lot of uncertainty on the part of fiscal policy, and this should be clarified by March,” Dabrowski explained. .

Grzegorz Ogonek, economist at Santander Polska Bank, in an interview with Interia Biznes, emphasizes that the phrase “uncertainty” in the shape of the fiscal policy of Donald Tusk’s government, which was included in the December statement after the Monetary Policy Committee meeting, is “a part that will stay with us for years.” Many more to come.” Texts. – It is not as if the Council said that when we know whether the zero VAT on food will continue to apply or whether energy prices will remain “frozen”, this uncertainty will disappear. will continueWe can replace many issues under the same concept of “uncertainty”.

– Along the way, there were also statements by members of the Monetary Policy Committee that the fiscal deficit for 2024 was too large and should be met with monetary policy – the economist notes.

Fiscal policy has recently taken a large part in the statements of decision makers in the Council – In a recent interview with Interia Biznes, Cezary Kochalski of the Monetary Policy Board noted that further decisions of the Monetary Policy Board will largely depend on the shape of fiscal policy and the decisions taken by Donald Tusk's government. – Now the focus of the debate on inflation is shifting towards the demand side. The demand side relates to fiscal policy and government spending. “This justifies our great uncertainty, because we do not know for sure which programs of the new government will be implemented, to what extent, and which ones will not be implemented,” Kochalski said.

Taking all this into consideration, The first date of the presidency of the Monetary Policy Council Adam Glabinski They may decide to move on their feet, and it becomes March – The month of publication of the National Reserve Bank's upcoming macroeconomic forecasts. At the March meeting, the Council will review this document, thus gaining greater knowledge about the expected path of inflation and economic growth processes.

– but It will be interesting, first and foremost, to see how the Board reacts in March to inflation falling within the range of deviations from the inflation target. And whether this is considered a sufficient reason to cut interest rates – says Grzegorz Ojonik from Santander.

Let us remind you that the inflation target set by the National Bank is 2.5%. With an acceptable deviation of 1 percentage point. Up or down, giving a range of 1.5 – 3.5 percent.

– The forecast is for March – confirms the economist when asked about the possible moment when the CPI will be in this range. – Of course, this decline in inflation coincides with favorable statistical conditionsThat is, the basic impact and administrative decisions; But later, inflation will rise again and we will face the “hill”.

In their latest “Economic Weekly” report issued on January 5, economists at Santander BP expressed their belief that “after the deep decline in the first quarter of 2024, inflation will rise again and may start to rise abruptly.” After reading January December 1, Our lowered forecast now assumes a decline in CPI dynamics to approximately 2.5-3% y/y in March, mainly due to the expansion of anti-inflation shields: lower VAT on food and freeze on electricity prices, The subsequent unfreezing will eventually lead to higher CPI readings (6-7% y/y), especially as concurrent support to household disposable income in the first quarter may delay the decline in core inflation.

Santander's macroeconomics team estimates the latest rate was 6.8% in December. I expect the dynamics of changes in fundamental prices to remain high for several more quarters, including: as a result of the economic recovery.

“In addition, base effects will mean that the scope for further decline in food inflation is smaller, as in the case of fuel prices,” experts add. “Then ours Inflation expectations At the end of next year (6.5%-7% y/y) it is still above the market and we assume that The moment when inflation reaches the target is still far away; Beyond the horizon of previous inflation expectations and perhaps also the next inflation expectations NBP“.

Despite the expected lower inflation in March, economists at Santander BP “They do not expect a significant acceleration in interest rate cuts..

“We do not assume that the MPC can take any step before the next forecast in March, which assumes no price changes at the next meeting (January – Editor). In the basic scenario “We assume the first reduction in the fourth quarter of this year.” – they conclude.

According to economists from Credit Agricole and Millennium Bank, the first interest rate cut after a break of several months – and the first this calendar year – It will be held in March. There are many indications that the Monetary Policy Council has entered a winter hibernation from which it may wake up in the spring.