Poland: Central Bank leaves rate unchanged at historic low
June 3, 2014
The National Bank of Poland (NBP) kept its reference rate unchanged at 2.50% at its 2–3 June monetary policy meeting. The decision was in line with market expectations and marked the 11th consecutive meeting in which no change was made. Keeping interest rates at the current low level is said to support ongoing domestic economic growth and the return of inflation to the established target.
The Bank noted that the global economy continues to grow at a moderate pace and pointed out that conditions are improving in the U.S. after a contraction in Q1, while recovery in the Euro area has been weak. In terms of the domestic economy, the Bank emphasized the acceleration to 3.4% growth registered in Q1. Moreover, while data from April was somewhat mixed, there is evidence that positive momentum has carried over into Q2. Meanwhile, although the recovery is driving continued improvements in the labor market, unemployment remains elevated and is restricting wage pressures in the economy.
Regarding price developments, the Bank stated that inflation continues at well below the target of 2.5% plus/minus 1.0 percentage points. Moreover, the Bank explained that, even though, “gradual economic recovery is likely to continue in the coming quarters, inflationary pressure will remain very low.” As a result, the Bank decided to keep interest rates unchanged. Moreover, it reiterated that the period during which rates should be kept unchanged is, “at least until the end of the third quarter of 2014.” Finally, the Bank noted that there is the possibility for an adjustment of rates after it assesses new incoming information, including its own updated macroeconomic projections.
Author: Carl Kelly, Economist