A Second Polish Rate Hike

April 5, 2011

Poland’s central bank reference rate was hiked today to 4.0% from 3.75%.  An initial 25-basis point increase on January 19 was the first tightening since June 2008. From November 2008 to June 25, six easings cumulating to 250 basis points were implemented. A  statement today from officials justified today’s action as necessary to ensure that the medium-term inflation target of 2.5% can be met.  CPI inflation has risen this year as a result of a value added tax increase and commodity pressures to 3.6% in February from 3.1% in December.  The statement observes a lessening risk of a Polish slowdown but also attaches a lot of uncertainty to the outlook of strengthening global demand.  Domestic corporate credit demand has been weak, and unemployment is high.  But the Zloty hasn’t been strong enough to mute inflationary pressures, so interest rates are being raised a second time.  And officials will continue to assess if more restraint is needed in the future.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.



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