NBP: NBP Speak Provokes Questions About Nature Of Eventual Transition To Easing

Comments from Polish central bankers from at least the past several week suggest a specific approach to forward guidance, which should be kept in mind when MPC members communicate their views on the interest-rate outlook. Crucially, some of them offered the timeframes for potential rate cuts, while others were referring to the possible discussion about rate cuts.

• The distinction was most explicit in the latest round of comments from Ludwik Kotecki, who said that a large majority of members see potential for a discussion about rate cuts in 1Q2025 but it is unclear if this will translate into actual rate cuts.
• The language used by MPC members provokes a question about the distance between a discussion and actual rate cuts - how long will it take the Council to transition from one to the other?
• This calls for a closer scrutiny of signals surrounding the degree of caution with which the MPC wants to approach future rate cuts to determine if it will gradually steer the markets towards the start of an easing cycle or take action relatively abruptly.