Polish Reference Rate Not Changed But Reserve Requirement Hiked

October 27, 2010

The Narodowy Bank retained a 3.5%, which is the level of the main reference rate since a 25-basis point cut in June 2009 culminated 250 basis points of reduction since November 2008.  A statement from Polish central bank officials gave three reasons for not increasing the key interest rate:

  1. Limited domestic price and wage pressures.  Total CPI is in line with the 2.5% target, but core inflation is running below that level.
  2. The risk of capital inflows to Poland and other emerging economies.  These threaten to lift the zloty, which would depress growth and import prices.
  3. The possibility of weaker global growth.

Poland’s reserve requirement, which was cut to 3% from 3.5% in mid-2009, will revert to 3.5% on December 31.  Eventually, officials will increase the 3.5% reference rate.  If that didn’t happen, staff forecasts put the range of CPI inflation in 2012 at an above-target 2.4-3.7% range with 50% probability.  The next interest rate announcement will be made on November 23.

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



Comments are closed.