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Poland Monetary Policy December 2020

Poland: Central Bank stands pat in December

At its meeting on 2 December, the National Bank of Poland (NBP) yet again kept the reference rate unchanged at its historic low of 0.10%. The decision marked the sixth consecutive hold and was in line with market expectations. The NBP also kept the lombard rate unaltered at 0.50%, the deposit rate at 0.00% and the rediscount rate at 0.11%. Moreover, the Bank reaffirmed 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 stand pat chiefly reflected the Bank’s attempts to soften the blow from the pandemic and support the economic recovery. While the economy rebounded strongly in quarterly terms in the third quarter, the surge in new Covid-19 cases in November, which led to renewed restrictions, has heightened uncertainty and will be weighing on the economy in the final quarter of the year. Meanwhile, on the price front, a flash estimate showed inflation fell to 3.0% in November (October: 3.1%), thus moving slightly closer to the midpoint of the Bank’s target range of 1.5%–3.5%.

Going forward, the Bank’s monetary policy stance is set to remain largely accommodative, in order to cushion the fall in employment and 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:

“We expect +0.10% to mark the floor in rates in Poland, with any additional monetary easing delivered by the NBP to focus on quantitative easing measures. We maintain our view that Polish (and CEE) rates are likely to remain low for a long time, and do not expect the NBP to change rates at least until 2022H2.”

The next monetary meeting is scheduled for 13 January 2021.

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