Dr Marek Porzycki
Chair for Economic Policy
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Euro area quantitative easing – ECB expanded
asset purchase programme, 22 January 2015,
and recent monetary policy decisions in
December 2015
Fed monetary policy decisions in December
2015 – first interest rate hike since 2006
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Poland’s monetary policy after the
government change following the Oct 2015
election
current monetary situation: prolonged
deflation
new appointments to the NBP decisionmaking bodies ongoing and expected in 2016
further loosening of the monetary policy to
be expected?
plans to introduce a „bank tax” and its
possible impact on the money supply
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announced on 22 January 2015, started in March 2015
http://www.ecb.europa.eu/press/pressconf/2015/ht
ml/is150122.en.html
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coverage: bonds issued by euro area central
governments, agencies and European institutions
amount: 60 bn EUR monthly
duration as announced in Jan 2015: „until at least
September 2016 and in any case until the Governing
Council sees a sustained adjustment in the path of
inflation that is consistent with its aim of achieving
inflation rates below, but close to, 2% over the medium
term”.
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„Aimed at fulfilling the ECB’s price stability
mandate, … to address the risks of a too prolonged
period of low inflation.”
„situation in which most indicators of actual and
expected inflation in the euro area had drifted
towards their historical lows”
potential second-round effects on wage and pricesetting ( result of expectations)
„forceful monetary policy response” needed
context: key ECB interest rates are already at their
lower bound ( „pushing on a string”)
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making access to finance cheaper for firms
and households  supporting investment
and consumption, and ultimately
contributing to a return of inflation rates
towards 2%
purchase of bonds against central bank
money, „which the institutions that sold the
securities can use to buy other assets and
extend credit to the real economy. In both
cases, this contributes to an easing of
financial conditions.”
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controversial issue resulting from:
complex structure of the Eurosystem
varying creditworthiness of EU governments  differences in
credit quality of bonds
coordination of purchases by the ECB ( control over money
supply)
decentralised implementation by the Eurosystem central
banks (NCBs)
loss-sharing between NCBs on bonds issued by EU
institutions (12% of purchases) and on direct purchases by
the ECB (8%)
no loss-sharing on the remaining 80% - purchases by NCBs
 NCBs alone will bear the credit risk of the respective
sovereign bond issuer
credit quality criteria applicable in principle
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deposit rate decreased by 10 basis points to -0.30% 
further move into negative territory
interest rate on the main refinancing operations and the
interest rate on the marginal lending facility unchanged at
0.05% and 0.30% respectively
the expanded asset purchase programme extended at
least until March 2017, „in any case until the Governing
Council sees a sustained adjustment in the path of
inflation that is consistent with its aim of achieving
inflation rates below, but close to, 2% over the medium
term”, in unchanged amount of monthly purchases of €60
billion
http://www.ecb.europa.eu/press/pressconf/2015/html/is
151203.en.html
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underlying factors:
moderate expansion of economic activity
improvement in the labor market
inflation below long-term objective of 2%, expected
to rise in medium term
the target rate for the federal funds rate
(corresponds to the deposit rate) raised from 0,25%
to 0,5%
discount rate (corresponds to the refinancing rate)
raised from 0,75% to 1.00%
http://www.federalreserve.gov/monetarypolicy/file
s/monetary20151216a1.pdf
last decisions by the Monetary Policy Council: interest
rates unchanged at 0,50% (deposit rate), 1,50%
(reference rate) and 2,50% (main refinancing rate)
http://www.nbp.pl/en/onbp/organizacja/minutes/mi_xii
2015en.pdf
 deflation persists since mid-2014, opinions vary
whether return to positive rates of inflation is expected
 8 out of 9 members of the Monetary Policy Council will
be appointed in January and February 2016
 the term of office of the NBP President ends in June
2016
 new appointments likely to be „doves”  a lowering of
interest rates cannot be excluded
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a crucial component of the new government’s
economic policies
Law on tax on certain financial institutions adopted
on 29 December 2015 and subsequently amended
in the Senate, final vote in Parliament pending
entry into force planned from 1 February 2015
banks to be taxed 0.44% of the value of their assets
per year
banks and credit unions with assets under 4bn PLN
to be exempted
bank assets include loans  additional cost on
lending  restriction on lending and on the money
creation mechanism
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the „bank tax” will make interest rate cut unlikely
to boost lending  no increase in inflation, no
increase in economic growth
interest rate cut may contribute to the
depreciation of the PLN  possibility of some
„cost-push” inflation; possibility of short term
improvement of competitiveness of Polish
exports
costs of the „bank tax” imposed on banks are
likely to be passed on to the consumers in result
of increased bank fees