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Expect further rate cuts in Poland – Danske Bank

FXStreet (Edinburgh) - Analysts at Danske Bank assessed the recent decision of the NBP to cut the repo rate by 50 bps, taking it to 2.0%.

Key Quotes

“Polish rates and yields dropped on the decision while the Polish zloty has lost a bit; however, the move in the zloty was quite limited, in our view”.

“We have been calling for monetary easing in Poland for a long time. There were clear signs that the economy has been slowing down while inflation dropped below zero and Poland faces the deepest deflation pressures among other CEE countries”.

“Despite the NBP being very reluctant to acknowledge that further easing is needed, the dovish wording has strengthened within the RPP over the past two months and after the September RPP meeting, the central bank clearly signalled that it is ready to cut in October”.

“We think that more easing is needed and we expect the NBP to ease monetary policyfurther in the coming months”.

“However, given the larger rate cut today, the NBP might take a breather before it cuts again”.

“Hence, the NBP might pause in November but it might deliver 25bp in December and more next year”.

“When we look at our inflation model, we expect deflation to deepen further in the coming months while economic growth should slow further. This clearly strengthens the case for further easing”.

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