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Poland Monetary Policy February 2020

Poland: Central Bank holds its ground in February

The National Bank of Poland (NBP) kept the reference rate unchanged at a record low of 1.50% at its 4–5 February monetary policy meeting, as had been widely expected. In addition, the Central Bank held the Lombard rate stable at 2.50%, the deposit rate at 0.50% and the rediscount rate at 1.75%. The Bank has stood pat since ending its easing cycle in March 2015.

The Bank’s decision to stand pat resulted from balancing off rising inflation with softening albeit still-solid growth and the ultra-loose monetary policy stance of the European Central Bank. Headline inflation jumped to 3.4% in December from 2.6% in November—stoked by rising food and fuel prices—landing just below the upper bound of the Central Bank’s target range of 2.5% plus or minus 1.0 percentage point. Meanwhile, growth slowed notably in 2019, weighed by persistent weakness in Germany’s industrial sector.

Looking ahead, the Bank maintained its positive assessment of the country’s economic conditions, although it expects growth to slow compared to previous years. FocusEconomics analysts see the Bank keeping the rate substantially unchanged this year, as it attempts to balance faster inflation with weaker external demand and the ECB’s accommodative monetary stance.

Commenting on the likely direction of monetary policy ahead, Rafal Benecki, chief economist for Poland at ING, and Karol Pogorzelski, Poland economist at ING, noted:

“The MPC’s tolerant approach to further CPI growth or downplaying structural causes of inflation and economic slowdown reinforces our belief that rates will not change at least until the end of 2021.”

The next monetary policy meeting is scheduled for 3–4 March.

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