Poland: NBP surprising cut leaves room for the zloty to weaken – TDS

The NBP has again surprised the consensus by cutting rates by 40bps to 0.1%, economists at TD Securities apprise. EUR/PLN trades at 4.4563 after rising from 4.4145 yesterday.

Read: EUR/PLN three-month forecasts trimmed to 4.80 from 5.00 – Rabobank

Key quotes

“The NBP decided to cut its Base Rate by 40bp to 0.1% against our view and the unanimous consensus for all rates to stay on hold. In total, the NBP has cut the Base Rate by 140bps since the start of the Covid-19 emergency. Moreover, the NBP initiated its first-time ever QE program.” 

“We think today's cut is most likely the last one in this cycle - it should close a set of preemptive measures enacted to offset worsening economic conditions. Therefore, the Base Rate will likely stay at 0.1% for the rest of the year unless the economic outlook deteriorates significantly more than already anticipated.”

“Although the zloty remained relatively stable since the end of March, and strengthened quite visibly since the third week of May, we see room for it to weaken in the coming weeks. This view is especially supported in light of today's decision.”