National Bank of Poland Retains a Record Low 1.5% Policy Interest Rate

July 8, 2015

A sequence of nine 25-basis points reductions and two cuts of 50 basis points beginning in November 2012 was punctuated by one of the two larger moves this past March.  As after a prior meeting in early June, monetary officials in Poland today released a statement providing a neutral policy bias.

In the opinion of the Council, the annual price growth will remain negative in the coming months, mainly due to the earlier sharp fall in commodity prices. At the same time, the expected stable economic growth, amidst recovery in the euro area and good situation in the domestic labor market, reduce the risk of inflation remaining below the target in the medium term. Such an assessment is supported by NBP’s July projection. Therefore, the Council decided to keep NBP interest rates unchanged.

The released statement provides range forecasts for inflation of -1.1% to -0.4% this year, 0.7-2.5% in 2016, and 0.5-2.5% in 2017.  GDP is projected to climb 3.0-4.3% in 2015, 2.3-4.5% in 2016, and 2.5-4.7% in 2017.  The statement addresses the Greek debt crisis with the following declarative statement of what’s happened:  “Despite the ongoing recovery in developed economies, the sentiment in the financial markets has recently deteriorated in the wake of growing fears of a Greek insolvency. This was conducive to a fall in prices of some financial assets as well as a weakening of exchange rates of Central and Eastern European currencies, including the zloty.”  But there’s no indication this development will modify the current wait-and-see policy stance.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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