Poland keeps reference rate at 4½% as CPI falls, uncertainty abounds

By Susanna Moon

Chicago, Nov. 9 - National Bank of Poland's Monetary Policy Council said it decided to keep the bank's reference rate unchanged at 4½% at its meeting on Tuesday and Wednesday. The bank last raised the rate by 25 basis points in June.

In September, annual Consumer Price Index inflation fell to 3.9%, staying above the bank's inflation target of 2.5%. The drop was related to falling food prices amid soaring energy prices. Core inflation net of food and energy prices ticked down, according to the bank's press release.

At the same time, the Producer Price Index continued to record strong growth, and inflation expectations of households shifted up.

The bank said that annual CPI inflation will run high in the next months because of a spike in global commodity prices and depreciation of the zloty in recent months.

In the medium term, inflation will be curbed by lower economic growth in the country against the backdrop of fiscal tightening, interest rate hikes in the first half of the year as well as the expected global economic slowdown, the bank said.

"There persists heightened uncertainty about global economic developments in the coming quarters and about the scale of economic slowdown in countries being Poland's main trading partners," the bank said.

"The risk of a global economic slowdown combined with fiscal problems faced by some countries are behind the enduring tensions in the financial markets worldwide," the bank noted.

The council raised the rate to 4¼% in May and to 4% in April.

The Lombard rate remains unchanged at 6%, and the rediscount rate is 4¾%.

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