Poland Monetary Policy


Poland: Central Bank maintains its wait-and-see approach

December 7, 2011

At its 6-7 December monetary policy meeting, the Central Bank left interest rates unchanged at 4.50% for a sixth consecutive month, in a move that was expected by the market. Interest rates have thus remained unchanged since June, when the Bank raised rates by 25 basis points. The wording of the statement was similar to the previous month's, as the National Bank of Poland (NBP) cited weak growth in the Euro area and heightened volatility in the financial markets as one of the main factors behind its decision. The Central Bank's decision also reflected the recent weakening of the Polish zloty (PLN), which presents an upside risk to inflation. On 30 November, the zloty traded at 4.55 per EUR, which represented a 4.5% nominal depreciation compared with the previous month. The zloty weakened even more versus the USD in nominal terms, depreciating 9.4% over the previous month. The Central Bank reiterated that it will continue intervening in the FX market to stabilize the zloty. The Central Bank maintained its opinion that ?in the medium term inflation will be curbed by gradually decelerating domestic demand amidst fiscal tightening, including reduced public investment spending, and interest rate increases implemented in the first half of 2011, as well as the expected global economic slowdown.? That said, inflation increased to 4.3% in October and remains well above the Central Bank's inflation target of 2.5% with a tolerance margin of 1.0 percentage points. However, the NBP expects inflationary pressures to moderate at the beginning of 2012, as the impact of VAT rate increases, as well as food and energy price rises in the first half of 2011, gradually abates.


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