Polish Monetary Policy Settings Left Unchanged

July 29, 2009

A streak of six consecutive monthly rate reduction by the National Bank of Poland ended as expected in July.  The reference rate will remain at 3.5% after cuts totaling 250 basis points from November through June (four of 25 bps and one each in December and January of 75 bps).  In contrast to a severe recession elsewhere in Eastern Europe, Polish GDP posted marginally positive growth of 0.8% in the year to 1Q.  Industrial production fell in the year to 2Q09 but seems to be flattening.  Officials observed that the global recession seems poised to fade gradually.  A statement from officials asserted that while CPI inflation lies at the top end of a target range presently, and indeed it has surpassed the 2.5% point target for near two years.  Nonetheless, officials believe that a greater chance exists of sub-target inflation than above-target inflation in the medium term.  Polish monetary policy appears to have entered a wait-and-see phase.

Copyright Larry Greenberg 2009.

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