Polish Monetary Settings Unchanged But CPI Forecast Revised Upward

June 30, 2010

Narodowy Bank policymakers are keeping the central bank reference rate at 3.5%.  A year has now gone by since the last of six rate reductions.  The first of these in November 2008 and final three in February, March and June of 2009 were by 25 basis points, while those announced in December 2008 and January 2009 were by 75 bps each.  Today’s action had been expected in light of concerns about European sovereign debt and signs of slower U.S. growth.

New quarterly growth and CPI forecasts for 2010-12 from Poland’s central bank nonetheless got revised upward.  Notably, projected CPI inflation for all three years is now centered above the 2.5% target.  Officials also now attach 50% probability to GDP expanding in a range of 2.3-3.9% this year, 3.5-5.9% in 2011, and 2.2-5.0% in 2012.  GDP rose 3.0% between 1Q09 and 1Q10, while Polish industrial output was 9.8% greater in April than a year earlier. All of this heralds an eventual rate increase, but it is unlikely that such will occur in the second half of this year since it is now doubtful that either the Fed or ECB will be raising rates as soon as then.

Today’s statement from officials urged fiscal consolidation and reserved the right to use currency intervention as a policy tool.

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



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