Half percentage point cut in borrowing rate surprises analysts

photo - sxc.hu

The MPC announcement after its monthly meeting on Wednesday means the reference rate is now 3.25 percent. lombard rate 4.75 percent, deposit rate 1.75 percent re-discount rate to 3.50 percent.

This is the fifth consecutive month that the rate-setting body has cut the cost of borrowing in Poland, though the half percentage point cut is deeper than the four 0.25 bps cuts in previous months.

"This is a surprising decision as previous signals pointed to a break in the cycle of cuts,” says Przemysław Kwiecień, chief economist at X-Trade Brokers DM SA.

The reason for the 0.50 percentage point cut could be “even weaker economic growth than previously forecast and very low inflation,” says Rafał Benecki, choef economist at ING bank in Warsaw.

“This may be the reason why the MPC decided to cut so aggressive now […] as we are facing the longest period of slowdown in domestic demand in the last twenty years,” he added. (pg)

source: PAP