Another Rate Cut at the National Bank of Poland

June 5, 2013

A 25-basis point reduction to a record low 2.75% 7-day Polish repo rate brings the cumulative relief since last November to 200 basis points.  A statement from Poland’s Monetary Council justified today’s action by citing weak domestic demand, lessening support from exports, sub-target inflation, deterioration of the labor market that points to weak wage growth, and limited bank lending to the private sector.

In the opinion of the Council, incoming data point to weaker than expected economic growth in Poland and a stronger – than forecasted in the March projection – decline in inflation. At the same time, uncertainty about the scale and timing of the expected economic recovery in the euro area persists, which can adversely affect economic activity in Poland.

Consumer prices increased just 0.8% in the year to April, 1.7 percentage points below the central bank’s target.  Harmonized EU GDP data released today by Eurostat show Polish GDP edging 0.1% higher between 4Q12 and 1Q13 and 0.5% higher than a year earlier.  Today’s cut was the seventh in the past eight meetings.  There was no change in April, but the March reduction of 50 basis points was twice as larger as the other six.

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

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