Unchanged Polish Monetary Policy

November 9, 2011

Officials at the Narodowy Bank decided to leave their seven-day reference interest rate at 4.5% as they had decided at the previous three policy meetings and as analysts were anticipating.  Four increases of 25 basis points each were undertaken in the first half of 2011, snapping a 19-month pause at 3.5%.  In the Great Recession, the key benchmark rate was reduced by a total of 250 basis points from a pre-November 2008 peak of 6.0%.

CPI inflation of 3.9% in September still surpassed the 2.5% target, and GDP on-year growth of 4.0% last quarter was decent.  But with what else is happening in Europe, this is not a time to gamble on tightening monetary policy.  Poland has a higher-than-10% rate of unemployment.  By the same token, a rate cut would be risky given that Polish authorities had to intervene two months ago in support of the zloty against the euro.  Poland’s budget and current account deficits are each larger than 5% of GDP.

The next and final interest rate announcement of 2011 is scheduled for December 7.

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



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