Polish Reference Rate Kept Steady

November 23, 2010

Narodowy Bank’s seven-day repo rate has been 3.5% since June 2009 and will remain there even though CPI inflation moved up from the targeted 2.5% in September to 2.8% in October.  That was the first above-target outcome in seven months.  At recent meetings, the monetary policy council has considered a rate cut and narrowly missed voting in favor of such in August.  At the end of this year, reserve requirements are set to climb to 3.5% from 3.0%.  A deterrent to raising interest rates is the risk that such a move would intensify capital inflows.  A statement posted on the central bank’s web site cites limited core inflation and wage pressures and the possibility of weaker global growth as other reasons to leave the benchmark interest rate at 3.5%.  Higher overall inflation in October was caused by food and energy, while the core index remained steady and below the headline pace.  Real GDP rose 3.5% in the year to 2Q10, and the current account deficit slightly exceeds 2.5% of GDP.  The key interest rate was at 6.0% before the world recession.  In six moves including cuts of 75 basis points in December 2008 and January 2009, it was reduced by 250 basis points in the space of eight months.

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



Comments are closed.