National Bank of Poland votes to decrease interest rates by 25 bps

By Tali David

Minneapolis, May 8 - The National Bank of Poland's Monetary Policy Council decided to decrease its interest rates by 25 basis points at a meeting held Tuesday and Wednesday, according to an announcement from the bank.

The reference rate was cut to 3% from 3¼%, the Lombard rate to 4½% from 4¾%, the deposit rate to 1½% from 1¾% and the rediscount rate to 3¼% from 3½%.

The council said that incoming data show that the global economic activity remains weak. Despite acceleration in economic growth in the United States in the first quarter, consumer and corporate confidence weakened somewhat in March 2013.

Recession probably continued in the euro area, and in Germany - despite expected positive growth rate - the sentiment of economic agents weakened. A weakening of economic growth was also observed in China.

Weak global economic activity contributed to a decline in inflation in many countries. The recent decrease in commodity prices in the global markets is also conducive to lower inflation, the bank said.

In Poland, the GDP data confirmed that economic growth is low. In the fourth quarter of 2012, GDP growth was weaker than previously estimated. Data on industrial and construction output as well as retail sales in the first months of 2013 show that economic activity growth also remained weak in the first quarter of 2013.

Weak business climate indicators also confirm subdued economic activity.

The bank said that consumer price inflation declined again in March, reaching 1% year-over-year, a level markedly below the inflation target of 2.5%. The decline in inflation was mainly driven by a decrease in food price growth.

Core inflation measures and producer price inflation also declined, which confirms weak demand and cost pressures in the economy. This was accompanied by a decline in inflation expectations of households, the notice said.

The council said it believes the incoming data indicate that economic growth in Poland remains weak, while inflation decline is stronger than forecasted in the March projection.

At the same time, uncertainty about the pace and timing of the expected recovery in the euro area has increased, which can adversely affect economic activity in Poland. Hence, the risk of inflation staying markedly below the target in the medium-term has risen.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.