The zloty weakened after the surprising decision of the MPC

The Monetary Policy Council surprised the market by not raising interest rates in Poland, to which the zloty reacted with a weakening against the main currencies. Later, he was "hit" by the deterioration of moods in the global markets and another flight to the dollar. The reaction to the president's press conference tomorrow will decide what to do next National Bank of Poland.

Interest rates unchanged

After a series of 11 consecutive interest rate increases, the Monetary Policy Council (MPC) decided today to keep them unchanged. As a result, the main rate in Poland was kept at 6,75 percent. This decision surprised the analysts a lot. After the September explosion of inflation to 17,2 percent. from 16,1% year on year in August, most were betting a 25 basis point hike to 7%.

In the communiqué, the Council argues that those elements of inflation influenced by its decisions, the one-year rate hikes are already in effect, while further monetary tightening would not have any impact on external shocks. The Council wrote that next decisions will depend on the outlook for inflation and economic activity. It can be considered a loose suggestion if the rate hikes do not end, then at least a very long break.

The zloty is losing

The surprise funded today by the MPC shook the currency market. The zloty weakened against the main currencies. In the first reaction to the decision of the Council, the price increased by 3-4 groszy. And so the EUR / PLN exchange rate jumped right after the decision from PLN 4,7958 to PLN 4,8360. Later, the domestic currency ricocheted even more on the wave of a stronger decline EUR / USD and deteriorating sentiment in global markets.

At 17:04 the EUR / PLN exchange rate was at PLN 4,8302, and USD / PLN increased to PLN 4,9027.

EUR / PLN daily chart. Source: Tickmill

USD / PLN daily chart. Source: Tickmill

Tomorrow, global factors will further determine the behavior of the zloty, but the main impulse will be what the president of the National Bank of Poland, Adam Glapiński, will say about monetary policy at the press conference. The conference is scheduled for 15:00.