Poland Monetary Policy


Central Bank pauses tightening cycle

At its latest monetary policy meeting held on 5-6 July, the Central Bank decided to leave interest rates unchanged at 4.50%, in a move that was broadly expected by the market. The decision followed four interest rate increases beginning January 2011, when the Narodowy Bank Polski (NBP) began to withdraw monetary stimulus from the economy. Within a span of six months, NBP has raised interest rates by a cumulative 100 basis points. According to the Monetary Policy Council (MPC), ?the substantial monetary policy tightening implemented since the beginning of 2011 should enable inflation to return to the target in the medium term.? In May, inflation jumped to 5.0%, the highest level in almost ten years, exceeding the 1.0 percentage point tolerance margin around the Central Bank's 2.5% target. However, policymakers stressed that going forward, ?inflation will be curbed by a likely slowdown of economic growth amidst fiscal policy tightening, including a decline in public investment.? More recent CPI data from June confirm the Central Bank's opinion, with inflation falling to 4.2%.


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