Fourth Central Bank Rate Hike in Poland

June 8, 2011

The Narodowy Bank reference rate has been lifted 25 basis points to 4.5%, bringing its cumulative rise to 100 bps.  The cyclical low of 3.5% had been kept for 19 months to January 2011 following 250 bps of easing administered from November 2008 through June 2009.  A statement on the central bank web site cites above-target inflation and a rise of expected inflation and implies that the current degree of restraint ought to suffice but does not rule out the possibility of a fifth or more tightenings in the future.

The elevated level of current inflation and inflation expectations, as well as the risk of rising wage pressure amidst a considerable growth in employment, justify increasing the NBP interest rates at the present meeting.  The Council assesses that the substantial monetary policy tightening implemented since the beginning of 2011 should enable inflation to return to the target in the medium term.  The Council does not rule out further adjustment of monetary policy, should the outlook for inflation’s return to the target deteriorate.

CPI inflation accelerated from 3.1% in the year to December 2010 to 4.5% by April 2011, two percentage points greater than target.  Polish exports have benefited from particularly strong German growth, and GDP is expected to expand slightly faster than 4.0% in both 2011 and 2012.  However, concern about Euroland’s peripheral economies, which has intensified, is being watched by Narodowy Bank officials.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.

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