Polish Monetary Reference Rate Left Unchanged as Expected

October 5, 2011

The Narodowy Bank’s key 4.5% interest rate was not changed after this month’s policy meeting.  Increases of 25 basis points each were implemented earlier this year in January, April, May and June.  4.5% in the reference rate compares to a pre-recession crest of 6.0% from June to November of 2008.  Six ensuing cuts reduced such to 3.5% by the middle of 2009.

A statement posted on the central bank’s web site observes that CPI inflation of 4.3% in August was nearly two percentage points greater than target but indicates that weak global and domestic growth are likely to trim inflation to acceptable levels in the medium term.  There have been further signs of weakening global growth and enduring financial market tensions, and declining Polish business activity with elevated unemployment is possible.  The statement does not flag a possible interest rate cut as a result, however.  Officials believe that “the significant monetary policy tightening implemented since the beginning of 2011 should enable inflation to return to the target in the medium term.”  But they are prepared to tighten anew if required: “The Council does not rule out the possibility of further monetary policy adjustments, should the outlook for inflation returning to the target deteriorate.”

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



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