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Poland Monetary Policy September 2020

Poland: Central Bank holds rates at historical low in September

At its meeting on 15 September, the National Bank of Poland (NBP) decided to maintain the reference rate at an all-time low of 0.10%, marking the Bank’s third consecutive hold and coming in line with market expectations. In addition, the Central Bank held the Lombard rate stable at 0.50%, the deposit rate at 0.00% and the rediscount rate at 0.11%. At the same time, the Bank reiterated its commitment to support liquidity in the financial markets and contribute to the normal functioning of the banking system.

The sharp decline in economic activity recorded in Q2, owing to pandemic containment measures, coupled with declining inflationary pressures largely drove the Bank’s decision to keep its policy stance unchanged. GDP contracted at a record pace in Q2 amid plummeting private and capital spending, as lockdown measures forced the closure of non-essential businesses and constrained consumption. That said, the Bank stated that economic activity is likely to pick up in the coming months, but stressed that downside risks persist. On the inflation front, subdued domestic demand and a decline in energy prices have exerted downward pressure on prices lately, with inflation easing to 2.9% in August (July: 3.0%) and thus moving closer to the midpoint of the Central Bank’s target band of 1.5–3.5%.

Meanwhile, the Bank reiterated once again that it will continue to discount credit granted to businesses by banks aimed at refinancing loans, and reaffirmed its quantitative easing program with the continued purchasing of government bonds in the secondary market.

Looking ahead, the Bank’s monetary policy stance is likely to remain largely accommodative, in order to alleviate the fall in employment and to support economic recovery, which will also benefit from robust fiscal support and new EU funding. That said, downside risks stem from the unpredictable course of the pandemic weighing on investment decisions, weaker wage growth and weaker sentiment among households and businesses.

The next monetary policy meeting is scheduled for 7 October.

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