Poland’s Monetary Policy Council (MPC) has cut interest rates, yet again – this time by 25 basis points.

The base rate is now 3.75 percent and is the lowest in the history (until Wednesday the record level was 4.00 percent). There is a chance that the rates will be lowered further, according to a MPC statement that institution is at the beginning of softening monetary policy in Poland.

The cut is in line with market and economists’ expectations.

“The decision is a compromise between members of the MPC, who report on decreases in production, consumption and worsening conditions on the labour market and, on the other hand, of members who are afraid that low interest rates would have bad influence on Polish currency,” comments Rafał Benecki, an economist with ING Bank Śląski.

This is yet another interest rate cut in a series started in November 2008, when rates were cut by 25 basis points – the first time since February 2006. In December and January, the MPC reduced interest rates by 75 basis points, and another time in January by 25 basis points.

“It is probably not the end of reductions. We are expecting hard times for the Polish economy. That is why the MPC may gradually, but consistently, cut interest rates. The decline may reach even 3 percent”, Benecki added.

Unfortunately, mortgages will not be cheaper because of high margins taken by banks, but, unexpectedly, the Polish zloty reacted positively to the MPC’s decision. The zloty to the euro exchange declined from 4.57 to 4.55 on Wednesday evening. This shows positive investors’ assessments for decisions which can decrease scale of recession in Polish economy.

Recent days situations on stock exchanges throughout Eastern and Central Europe have been unsteady for several reasons, including the government turmoil created by Prime Ministers’ dismissals in the Czech Republic and Hungary.  (dw/mmj)