Poland still keeps reference rate at 1½%, maintains other rates

By Marisa Wong

Morgantown, W.Va., Nov. 4 – 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.

The bank reported that in Poland stable economic growth continues, driven primarily by domestic demand. The growth in demand is supported by the strength of the labor market, strong consumer confidence, improvement in the financial standing of enterprises as well as by stable lending growth.

On the other hand, demand in the economy is adversely affected by uncertainty facing firms regarding the outlook for global growth, the bank noted.

As demand is growing at a moderate pace and the output gap is still negative, there is no inflationary pressure in the economy, the council pointed out. Both the annual consumer price growth and producer price growth remain negative. The sharp drop of commodity prices in the global markets remains the main reason for continued deflation. Amid moderate wage growth, the fall in commodity prices contains the risk of increasing cost pressure. With this, inflation expectations are still very low.

The council said it believes price growth will increase slowly in the coming quarters. Its growth will be supported by the gradual closing of the output gap amid improving economic conditions in the euro area and favorable domestic labor market developments, the bank said.

At the same time, the risk of a sharper slowdown in emerging market economies and the impact this may have on global economic activity, as well as the possibility of commodity prices staying at low levels, are still the source of uncertainty about the pace of inflation returning to the target.

As a result, the council decided to keep the rates unchanged.

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