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6 Feb 2013
Forex Flash: NBP eases rate by 25bp, likely to stay unchanged at 3.75% in 2013 – TD Securities
As the central bank of Poland, the NBP, lowered the reference rate by 25bp to 3.75%, in line with unanimous market expectations and being the fourth consecutive rate cut in the current easing cycle, TD Securities analysts will be now focusing on the policy statement and press conference at 3pm GMT.
“In the context of weak and disappointing economic data for December, the focus in today’s press conference will be on whether the NBP decides to maintain their commitment to a pause in March. In particular, the drop of Q4 GDP below 1% Y/Y (as implied from the 2.0% annual growth rate) is likely to erode their confidence from last month, and make the next rate decision more uncertain, especially considering that the new macro forecasts they will receive before the next meeting may suggest more weakness”, wrote analyst Marcin Budkiewicz, strategist at TD Securities, expecting the NBP to keep a cautious rhetoric, but with more room for manoeuvre. “Still, we believe that the NBP should not ease further, as rates are approaching levels seen by some MPC members as the limits of the easing cycle”, Budkiewicz, noting that FRAs imply approximately a 50% chance of a 25bp cut in March.
TD Securities analysts believe rates will reimain at 3.75% in 2013, though weak data and instances of dovish rhetoric would increase the risk of further cuts. “In this case, the 6m to 12m sector of the FRA curve could undergo some corrections if the markets reinstate their bets for deeper rate cuts, which have been reduced to approximately -50bp in the past days from –75bp (both) in late January, before accounting for today’s rate decision”, expecting a stronger positive reaction of the PLN if the NBP chooses to stick to their previous commitment.
“In the context of weak and disappointing economic data for December, the focus in today’s press conference will be on whether the NBP decides to maintain their commitment to a pause in March. In particular, the drop of Q4 GDP below 1% Y/Y (as implied from the 2.0% annual growth rate) is likely to erode their confidence from last month, and make the next rate decision more uncertain, especially considering that the new macro forecasts they will receive before the next meeting may suggest more weakness”, wrote analyst Marcin Budkiewicz, strategist at TD Securities, expecting the NBP to keep a cautious rhetoric, but with more room for manoeuvre. “Still, we believe that the NBP should not ease further, as rates are approaching levels seen by some MPC members as the limits of the easing cycle”, Budkiewicz, noting that FRAs imply approximately a 50% chance of a 25bp cut in March.
TD Securities analysts believe rates will reimain at 3.75% in 2013, though weak data and instances of dovish rhetoric would increase the risk of further cuts. “In this case, the 6m to 12m sector of the FRA curve could undergo some corrections if the markets reinstate their bets for deeper rate cuts, which have been reduced to approximately -50bp in the past days from –75bp (both) in late January, before accounting for today’s rate decision”, expecting a stronger positive reaction of the PLN if the NBP chooses to stick to their previous commitment.