Poland’s Second 50-Basis Point Central Bank Cut Since March 17th

April 8, 2020

Poland’s central bank reference rate has been halved to 0.50% and henceforth will be surrounded by a zero percent deposit rate and a 1.0% Lombard rate. There had been an initial monetary¬† policy response to Covid-19 on March 17, including a 50-basis point interest rate cut, liquidity injections via repo operations, and a program of government bond purchases to hold down longer term interest rates. Today’s statement from the National Bank of Poland’s Monetary Policy Council warns that

the scale of activity drop could be very sizable. This will be accompanied by a deteriorating situation in the labor market and a fall of disposable income of households. Further ahead, economic activity should, however, gradually recover, supported by fiscal measures introduced in Poland and many other countries as well as strong macroeconomic fundamentals of the Polish economy related to its low internal and external indebtedness and high competitiveness together
with geographical and sectoral diversification of Polish exports. Despite recent monetary policy easing introduced by NBP, the risk of inflation falling below the NBP inflation target in the monetary policy transmission horizon prevails.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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