Polish Monetary Policy Still on Hold

May 25, 2010

As expected, the Narodowy Bank’s key reference interest rate was kept at 3.5%, its level June 2009.  A 25-bp rate cut back then culminated a six-step easing from a prior cyclical high of 6.0%.  The first reduction, also by 25 basis points had been made in November 2008.  The Polish economy is projected to continue recovering.  Private forecasts of GDP growth hover near 3% in both 2010 and 2011.  The labor market is improving from a very depressed level, and the jobless rate exceeds 10%.  Capacity usage and business investment remain low.  Poland experienced severe flooding earlier this month, and Euroland’s sovereign debt crisis presents additional uncertainty in the growth outlook.  Despite a zloty depreciation of more than 5% against the euro since the Narodowy’s late-April meeting, a central bank statement observes that CPI inflation fell a tenth below target to 2.4% in April and calls inflation risks balanced.  The Zloty had been well-bid previously and a growing concern of central bank officials, who therefore likely welcome the fact that it has settled back.  No shift in monetary policy seems imminent.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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