National Bank of Poland

October 8, 2014

A 15-month pause in interest rate cutting ended today.  Poland’s Monetary Policy Council voted to cut its key reference rate by a greater-than-expected 50 basis points to 2.0%.  The Lombard rate was trimmed to 3% from 4%, narrowing the corridor between its level and the deposit rate, which remains at 1.0%.  The central bank’s rediscount rate also got sliced by 50 bps to 2.25%, maintaining a 25-bp premium on the key reference rate. 

The central bank released a statement that speaks of less dynamic growth, a lack of wage and other cost pressures, significantly lower-than-desired CPI inflation (currently at -0.3% versus a medium-term 2.5% target), low core inflation and expected inflation, and potential downside growth risks like the sanctions against Russia and softer German economy.  The statement also leaves the door open to further interest rate reductions:

The Council does not rule out further policy adjustment money if the incoming information, including the November projection of NBP, confirming significant risk of keeping inflation below target in the medium term.

November’s monetary review is scheduled for the 5th. 

Today’s rate cut brings the cumulative decline in the reference rate to 275 basis points over the past 23 months.  There were cuts of 25 basis points administered in November and December of 2012 and January, February, May, June and July of 2013, plus a reduction of 50 bps in March 2013.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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