Polish Reference Rate Not Changed But Reserve Requirement Hiked
October 27, 2010
The Narodowy Bank retained a 3.5%, which is the level of the main reference rate since a 25-basis point cut in June 2009 culminated 250 basis points of reduction since November 2008. A statement from Polish central bank officials gave three reasons for not increasing the key interest rate:
- Limited domestic price and wage pressures. Total CPI is in line with the 2.5% target, but core inflation is running below that level.
- The risk of capital inflows to Poland and other emerging economies. These threaten to lift the zloty, which would depress growth and import prices.
- The possibility of weaker global growth.
Poland’s reserve requirement, which was cut to 3% from 3.5% in mid-2009, will revert to 3.5% on December 31. Eventually, officials will increase the 3.5% reference rate. If that didn’t happen, staff forecasts put the range of CPI inflation in 2012 at an above-target 2.4-3.7% range with 50% probability. The next interest rate announcement will be made on November 23.
Copyright Larry Greenberg 2010. All rights reserved. No secondary distribution without express permission.
Tags: Poland
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