On December 5, the Monetary Policy Board begins its final decision-making meeting of the year. The decision on interest rates will be announced the next day. It seems that borrowers should not expect a St. Nicholas Day gift from the Monetary Policy Board.
The market does not expect any changes in interest rates, at least during the next few months.
December and a change of government will affect the position of the Monetary Policy Committee
The first – and least important – factor that experts point to is the fact that it does The Monetary Policy Board usually does not change interest rates at the last meeting of the year.
The second matter, which is much more important, is the results of the elections, the calendar and the parliamentary accounts. It indicates that there will be a change in government on December 11 or 12. And although the figures themselves are interesting (for Adam Glabinski, running the National Party under a prime minister from a different camp than the one who elected him would be completely new after 7.5 years in office), for the MPC, something completely different is more important.
The change of government, as announced by politicians from the three formations preparing to take power, will lead to changes in fiscal policy.
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“In recent public statements by the President and some members, there were statements that they want to wait for new information regarding decisions on regulated rates and the shape of fiscal policy in 2024,” ING analysts point out.
Economists from other banks also point to the same aspect. “We do not expect any changes – interest rates will remain at their current level, with a reference rate of 5.75 percent. The reaction function of the Board has clearly changed between the October and November meetings. Currently, the topic of communication is uncertainty regarding the direction of fiscal policy They are waiting for the forecast for March,” mBank experts point out.
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“The Monetary Policy Board is waiting for the uncertainty on regulatory issues and the position of fiscal policy to be clarified. This lack of urgency means that the probability of changing interest rates in the upcoming meetings is low” – this is an excerpt from the assessment of the situation made by Pekao SA economists.
Market: The Monetary Policy Council will change interest rates in March at the earliest
Experts from major banks also agree The Monetary Policy Board will not decide to change interest rates until at least March. They are somewhat less agreed about when the changes should actually begin. As we read in the analysis prepared by the Center for Analysis of Peacekeeping Forces:
The Council rarely changes interest rates in the last month of the year, and recent statements by members of the Monetary Policy Committee indicate that there is no possibility of such a move this year, similar to the meetings in January and February. We assume that the NBP reference interest rate will be maintained at 5.75%. The pace of decline in inflation has slowed, consumer demand has strengthened, and the tendency of most monetary policy councils to cut interest rates significantly has weakened. In addition, there remains a significant amount of regulatory uncertainty, as the Board noted after its November meeting. In our view, we will have a quiet few months on monetary policy, and discussion of possible interest rate changes may return in March, when the outlook for fiscal policy, at least in the short term, and the BOJ’s new GDP and economic forecasts emerge. Inflation will be known.
ING economists point out in their analysis that “at least until the National Reserve Bank’s March forecast, interest rates will remain unchanged,” although in their view “The inflation profile does not provide room for further easing in monetary policy until the end of next year.”
mBank experts also see the possibility of implementing such a scenario, noting that the Monetary Policy Council’s message will not change at least until next March and will be based on expectations of new forecasts and clarification of the new government’s political orientations. And the Rates may remain at 5.75%. Even longer than the end of the first quarter of 2024.
“The first moment the Council might consider any move would be the March meeting, but in our opinion, until then the Monetary Policy Board will decide to keep interest rates unchanged. The monetary policy easing cycle is scheduled to continue into the second half of the year and into 2025.” – say Bicau research experts.
The MPC says “we wait” and the WIBOR index increases
The absence of a decision from the Monetary Policy Council does not mean that borrowers will not face changes in the value of their loan installments. These are not directly linked to the price level, but rather to the WIBOR index, which responds to the decisions and announcements of the Monetary Policy Board.
The WIBOR 3M index, the most popular for loan agreements, fell from 6.9% between June and October. As much as 5.55 percent the day after the election, rising to 5.84 percent since November, when it became clear that the MPC was saying “we wait.”
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This level is considered somewhat “normal” for him, as it has remained at a level ranging between 0.1 and 0.2 percentage points for many years. Higher than the specified reference rate, which currently stands at 5.75%. This is bad news for those borrowers who last updated their installment amounts between the end of September and the first week of November. This means that their monthly commitment may increase slightly after the next update.
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