Poland: Central Bank stands pat in October as expected
The National Bank of Poland (NBP) kept the reference rate unchanged at a record low of 1.50% at its 1–2 October monetary policy meeting, as had been widely expected. In addition, the Central Bank held the Lombard rate stable at 2.50%, the deposit rate at 0.50% and the rediscount rate at 1.75%. The Bank has stood pat since ending an easing cycle in March 2015.
Softening inflation, a worsened global economic outlook and monetary policy loosening by the European Central Bank were behind the Bank’s decision. Headline inflation receded from an almost seven-year high of 2.9% in August to 2.6% in September, due to steeper price falls for utilities, and fuels as well as to lower price increases for food. Therefore, inflation approached the midpoint of the Central Bank’s target range of 2.5% plus or minus 1.0 percentage point, although the moderation could prove temporary. Meanwhile, the economy is suffering the spillovers of prolonged weakness in Germany, as suggested by a contraction in industrial production in August and declining business confidence throughout Q3. On the other hand, consumer spending remains solid.
Looking ahead, the Bank maintained a positive assessment of the country’s economic conditions, although it recognized downside risks stemming from a weak external backdrop have increased. Consequently, FocusEconomics analysts see the Bank keeping the rate unchanged this year, as it balances sustained inflation with weaker external demand and the ECB’s loose monetary stance.
The next monetary policy meeting is scheduled for 5–6 November.