Poland: Central Bank keeps rates at all-time low level in June; reaffirms quantitative easing
On 16 June, the National Bank of Poland (NBP) kept the reference rate unchanged at an all-time low of 0.10%. 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 reaffirmed its commitment to support liquidity in the financial markets and contribute to the normal functioning of the banking system.
The Bank’s decision to keep interest rates at ultra-low levels is designed to cushion the economic fallout from the health crisis and associated lockdown, and comes against the backdrop of downside pressures on prices. In an effort to keep supporting lending at favorable rates, the Bank will continue to discount credit granted to enterprises by banks aimed at refinancing loans. Additionally, the NBP reaffirmed its quantitative easing program, announcing it will keep purchasing government bonds in the secondary market to keep providing liquidity to the government bond market.
Looking ahead, the monetary policy stance looks set to remain largely accommodative, in order to prevent job losses and support an economic recovery; inflation is also poised to remain below the Central Bank’s 2.5% target. The spread of Covid-19 and associated containment measures took a heavy toll on economic activity in Q1 and the pace of contraction likely sharpened in Q2. That said, supportive monetary and fiscal policies should ensure an incipient recovery in the second half of the year.
The next monetary policy meeting is scheduled for 14 July.
Commenting on the meeting, Karol Pogorzelski, senior Poland economist at ING, stated:
“Poland’s central bank entered the “wait and see” mode today, expressing concerns about the relative strength of the currency. Unless PLN weakens significantly we don’t expect policy normalisation before 2022.”