Poland keeps reference rate at 1½%, expects inflation to stay low

By Angela McDaniels

Tacoma, Wash., May 6 – National Bank of Poland’s Monetary Policy Council voted to keep the reference rate at 1½%, the Lombard rate at 2½%, the deposit rate at ½% and the rediscount rate at 1¾% at its meeting on Tuesday and Wednesday, according to a bank news release.

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

At the same time, the council decided to keep the rates unchanged because it expects economic growth to gradually accelerate, reducing the risk of inflation remaining below the target in the medium term.

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 remain the main drivers of economic growth.

In turn, the relatively low, although accelerating, growth in demand from Poland’s main trading partners drags down economic activity in Poland, according to the council.

Due to the moderate growth in demand and continuing negative output gap, there is no demand pressure in the economy, the council said. At the same time, low commodity prices and moderate nominal wage growth are contributing to the continuing lack of cost pressure. As a result, the annual growth rate of consumer and producer prices remains negative, and the council’s inflation expectations continue to be very low.

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