Polish central bank left rates on hold today. Economists at TD Securities believes that the base rate will remain on hold throughout 2021, but that the NBP will likely ramp up QE, as well as use FX and verbal interventions to prevent EUR/PLN from moving notably below 4.5. 

Key quotes

“In line with expectations, the NBP kept the base rate on hold at 0.10%. Our view remains that the base rate will be kept on hold throughout 2021. However, the odds of a cut in 2021 have certainly increased due to continued zloty strength, a sharp slowdown in inflation, and recent remarks made by NBP Governor Glapinski that a potential cut is still on the table.”

“The zloty, in the absence of Central bank interventions, would likely continue to strengthen in the coming months due to the strong balance of payments. However, we expect that the NBP will continue to use a combination of FX purchases, verbal interventions and QE to keep EURPLN around 4.5.”