Poland: Central Bank leaves rate unchanged
February 5, 2014
The National Bank of Poland (NBP) kept its reference rate unchanged at 2.50% at its 4-5 February monetary policy meeting. The decision was in line with market expectations and marked the seventh consecutive meeting where no change was made. The Bank emphasized that keeping interest rates at the current low level supports ongoing economic recovery and a return of inflation to the established target. The Bank noted that global economic growth, "remains moderate, although the situation varies across countries." Steady improvements in the U.S. economy have prompted the Fed to scale back its quantitative easing program, which has impacted global markets. Meanwhile, the ECB is maintaining a highly-accommodative monetary policy amid sluggish growth. In terms of the domestic economy, recent figures show that a gradual recovery, driven primarily by a strong export sector, is under way. Industrial output and retail sales are also contributing to the recovery. Despite improvements in the labor market, unemployment remains elevated. Regarding price developments, the Bank stated that inflation reached 0.7% in the full year 2013, which is well below its target of 2.5% plus/minus 1.0 percentage points. Moreover, the Bank explained that even though, "gradual recovery is likely to continue in the coming quarters, inflationary pressures will remain subdued." As a result, the Bank restated that interest rates should be kept unchanged, "at least until the end of the first half of 2014." For 2014, panelists expect the policy rate to end the year at 2.90%. For 2015, the panel sees the rate ending the year at 3.64%.
Author: Carl Kelly, Economist