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

By Marisa Wong

Morgantown, W.Va., April 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.

The council said that stable economic growth continues in Poland. However, the data on industrial production and construction output signal that GDP growth in the first quarter of 2016 might have been slightly lower than in the previous quarter.

Stable consumption growth and rising investment continue to support economic growth, the bank said. The rise in consumer demand is driven by steady growth in employment and improving consumer sentiment. Investment growth is supported by sound financial standing of enterprises, their high capacity utilization and the relatively favorable prospects for demand. This is accompanied by stable lending growth, the council added.

At the same time, economic growth is hampered by weakening external demand, the council pointed out. Currently there is no inflationary pressure in the economy, because the output gap remains negative and average nominal wage growth is moderate. Annual consumer price growth and producer price growth remain negative.

However, external factors – particularly the earlier sharp fall in global commodity prices and low price growth surrounding the Polish economy – continue to be the main reason for deflation. This is accompanied by very low inflation expectations. The persisting deflation has not adversely affected decisions of economic agents so far, the bank said.

The council believes that price growth will stay negative in the coming quarters due to the earlier fall in global commodity prices. At the same time, it will be accompanied by stable economic growth, including an expected rise in consumer demand growth driven by rising employment, forecast acceleration of wage growth and an increase in social benefits.

Still, the downside risks to the global economic conditions and the volatility of commodity prices remain sources of uncertainty for the domestic economy and price development, the council said.

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

© 2015 Prospect News.
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