MNI MARKET ANALYSIS: Key Rate Pause Puts Spotlight On Reserves

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Executive Summary

• Governor Glapiński guided that the MPC will discuss reserve requirements at the next meeting.
• Changes to both the interest on required reserves and the reserve requirement ratio may be on the table.
• Speculation that the NBP could reduce the interest on required reserves has been doing the rounds.

Communications from the National Bank of Poland (NBP) suggest that June will not bring another ‘live’ rate review as most members of the Monetary Policy Council (MPC) appear to be leaning towards waiting with further cuts at least until the publication of a new macroeconomic projection in July. Against this backdrop, the Council will likely have a placeholder discussion of current macroeconomic developments next month, while turning its focus elsewhere. Prompted by a reporter’s question during his May 8 press conference, Governor Adam Glapiński revealed that the panel discussed the parameters of required reserves this month but decided to commission further analyses and revisit the question in June.

Figure 1: Key NBP interest rates, reserve requirement ratio (RRR) and POLONIA. Required reserve holdings are currently remunerated at reference rate.