National Bank of Poland Eases Policy for a Third Time

January 9, 2013

As expected the Monetary Policy Committee at Narodowy Bank cut the central banks reference interest rate to 4.0% from 4.25% following similar cuts at its final two monthly meetings of 2012. More easing is possible in the future.  According to a statement released after officials met,

The decrease in interest rates should support economic activity and reduces the risk of inflation falling below the target in the medium term.  The Council does not rule out further monetary policy easing should the incoming data confirm a protracted economic slowdown and should the risk of increase in inflationary pressure remain limited.

The statement observes weakness in Polish industrial production, retail sales, loan demand, construction and labor market data.  Real GDP is running below 2% but, unlike much of Europe, not contracting so far.  These rate cuts are meant to blunt the drag exerted by the economic and financial difficulties of Poland’s European trading partners, and this support is feasible because inflation has settled back near to the 2.5% target, while the zloty has been generally stable.

Before the current round of rate cuts, five 25-bp increases were implemented between January 2011 and May 2012.

Poland’s next scheduled monetary policy announcement will be on February 6th.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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