National Bank of Poland

September 2, 2015

Poland’s 1.5% central bank reference rate was left unchanged as expected, but a released statement flagged mounting downside inflation risks:  “Increasing risk of stronger economic slowdown in emerging economies and the declining commodity prices have raised the uncertainty about the pace of inflation returning to the target.”  After the meeting in early July, officials by contrast saw a diminishing danger of sub-target inflation in the medium term.  On-year CPI inflation is still negative, and expected medium-term inflation remains low amid a continuing output gap attesting to underutilized productive resources.  The baseline forecast calls for moderate domestic demand-led growth, a diminishing output gap and a gradual rise of inflation.  But the policy bias is toward ease, and an interest rate hike is still some ways beyond the realm of contemplation.  From 4.25% prior to November 2012, the reference interest rate was cut nine times to 2.0% by January 2014, and a tenth reduction of 50 basis points in size was implemented in March of 2015.  Narodowy Bank’s 2.5% Lombard rate and 0.5% deposit rate continue to provide a +/-1.0 percentage point corridor around the reference rate.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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