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

By Marisa Wong

Morgantown, W.Va., Dec. 2 – 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 a robust labor market, strong consumer sentiment and increasing household lending. GDP growth has been driven by a further, though slower than in the previous quarter, increase in investment. Corporate investment activity has been fueled by high capacity utilization and good financial performance of firms, the bank added.

However, uncertainty about the outlook for economic conditions abroad has constrained corporates’ propensity to invest, the council pointed out. Lower GDP growth in emerging economies also weakens export growth, the council said.

On the other hand, because a slowdown in imports has been growing stronger, the contribution of net exports to GDP growth remains positive, the bank noted.

Despite improved labor market conditions, wage growth remains moderate. This, together with the continuing negative output gap, does not produce any inflationary pressure in the economy, the council said. Both the annual consumer price growth and producer price growth remain negative, but the pace of deflation has recently declined. Deflation persists mainly due to a sharp fall of energy commodity prices in the global markets. Inflation expectations are still very low, the bank said.

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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