Polish 7-Day Repo Reference Rate Left at 3.5%

December 22, 2010

Officials at the Narodowy Bank voted to leave its interest rate structure unchanged, which was the result analysts were anticipating.  The key 3.5% key reference rate has already been at this level for a year and a half, following six reductions totaling 250 basis points from October 2008 through June 2009.

A statement from the central bank observes a more stable zloty, global economic headwinds due to balance sheet adjustments and high unemployment in the advanced economies and a domestic economic recovery that faces some additional constraints like a planned VAT increase, the lack thus far of a clear upturn in business investment, and higher costs for energy.  CPI inflation of 2.7% in November remains marginally above the 2.5% target and may move further away in the short term because of the aforementioned value added tax increase.  On the whole, however, price inflation and wage pressures are reasonably subdued amid double-digit unemployment.  New curbs are being introduced on foreign currency loans to Polish households.

The first monetary policy meeting of 2011 is scheduled for January 1819.

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



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