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Poland Monetary Policy January 2021

Poland: Central Bank on hold in first meeting of the year

At its first meeting of 2021 on 13 January, the National Bank of Poland (NBP) opted yet again to keep the reference rate unaltered at its record low of 0.10%. The decision marked the seventh consecutive hold and was in line with market expectations. The NBP also kept the lombard rate 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 its quantitative easing program, with the continued purchasing of government bonds in the secondary market. It will also continue to discount credit aimed at refinancing loans granted to businesses by banks.

The decision to keep rates steady largely reflected the Bank’s efforts to cushion the adverse impact of the ongoing health crisis and support the economic recovery. The sharp rise in new Covid-19 cases in November and the tightening of restrictive measures will have weighed heavily on activity in the final quarter of 2020, particularly in the services sector. Meanwhile, on the price front, a flash estimate showed inflation fell to 2.3% in December (November: 3.0%), thus moving slightly below the midpoint of the Bank’s target band of 1.5%–3.5%.

Going forward, the Bank’s monetary policy stance is set to remain broadly expansionary in order to support the recovery in activity, which will also benefit from robust fiscal support and new EU funding.

Reflecting on the outlook for monetary policy, Kevin Daly and Tadas Gedminas, economists at Goldman Sachs, commented:

“Although our baseline expectation remains that rates will be left unchanged at +0.10%, we think that the NBP has further room to ease policy through non-rate measures, for example via continued FX interventions or asset purchases. We also think that easy monetary conditions will be sustained for a prolonged period, and we expect that the NBP will delay any tightening until after the completion of the MPC’s current terms (ending in early 2022) and possibly well beyond this.”

The next monetary meeting is scheduled for 3 February.

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