Poland keeps reference rate at 1.5%, expects inflation to stay low

By Angela McDaniels

Tacoma, Wash., April 15 – National Bank of Poland’s Monetary Policy Council voted to keep the reference rate at 1.5%, the Lombard rate at 2.5%, the deposit rate at 0.5% and the rediscount rate at 1.75%, according to a news release.

In the opinion of the council, price growth will remain negative in the coming quarters, mainly due to the sharp fall in commodity prices.

At the same time, the council said it decided to keep the rates unchanged because the adjustment of its monetary policy in March – with continuing stable economic growth, an expected recovery in the euro area and good situation in the domestic labor market – reduced the risk of inflation remaining below the target in the medium term.

As previously reported, the council voted in March to decrease each rate by 50 basis points.

Economic activity remains stable in Poland, according to Wednesday’s news release. The council said rising domestic demand fueled by an improving labor market situation, the good financial condition of enterprises and stable expansion in lending remains the main driver of economic growth.

In turn, the relatively low, although accelerating, growth in demand on the part of Poland’s main trading partners and the continued uncertainty about the prospects for demand are factors limiting economic activity in Poland, according to the council.

Amid moderate growth in demand and gradual improvement in labor market conditions, there is no demand pressure in the economy, and nominal wage growth remains moderate, the council said. Combined with low commodity prices, this is contributing to continuing deflation, both in terms of consumer and producer prices. Alongside that, the council’s inflation expectations continue to be very low.

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