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Poland Monetary Policy September 2019

Poland: Central Bank holds its ground in September as expected

The National Bank of Poland (NBP) kept the reference rate unchanged at a record low of 1.50% at its 10–11 September 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 an easing cycle in March 2015.

Within-range inflation and an expected monetary policy loosening by the European Central Bank were behind the Bank’s decision. Although headline inflation hit an almost seven-year high of 2.9% in July, it receded to 2.8% in August, due to lower prices for utilities and fuels, which more than offset faster price increases for food and non-alcoholic beverages. Therefore, inflation remained well within Central Bank’s target range of 2.5% plus or minus 1.0 percentage point. Meanwhile, a challenging trade backdrop and the protracted weakness of Germany’s industrial sector threatens to weigh on the performance of the external sector, although available data points to continued robust growth of the domestic economy.

Looking ahead, the Bank maintained a positive assessment of the country’s economic conditions and expects inflation to temporarily rise above the target in Q1 and to stay close to the target afterwards. Consequently, FocusEconomics analysts see the Bank keeping the rate unchanged this year, as it balances higher inflation with weaker external demand and the ECB’s loose monetary stance.

The next monetary policy meeting is scheduled for 1–2 October.

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