Poland Monetary Policy


Poland: NBP cuts reference rate from 2.50% to 2.00%

October 14, 2014

The National Bank of Poland (NBP) reduced its reference rate from 2.50% to 2.00% at its 7–8 October monetary policy meeting, which overshot the 25-basis point cut the markets had expected. In addition, the Bank reduced the Lombard rate to 3.00% from 3.50% and kept the deposit rate unchanged at 1.00%, thus narrowing the corridor for market rates to plus/minus 100 basis points. As Adam Antoniak, Senior Economist at Unicredit Bank points out:

“The decline of the Lombard rate by 100bp will markedly reduce the cap for the maximum interest rate on loans, which the so-called “anti-usury act” sets at four times the Lombard rate (down from 16% to 12%). It may potentially stimulate demand for the most expensive loans (particularly consumer loans), but at the same time it could also curb the supply of such loans, if institutions offering them assess that the profit margin is insufficient to cover the credit risk (some customers might turn to non-bank institutions for expensive and risky loans).”

The Bank noted that the global economy is continuing to grow at a moderate pace. The Bank also pointed out that the U.S. economy is continuing to recover and that the economic outlook appears to be positive, while growth in the Euro area remains subdued and business climate indicators suggest a further deterioration. On the domestic front, the Bank emphasized that the deterioration in economic activity persists. GDP increased 3.3% annually in Q2, which was slightly below the 3.4% expansion tallied in Q1. Recent data for Q3 point to a further slowdown, as suggested by weaker results in industrial production, construction, as well as in retail sales and the business climate indicators.

Regarding inflation, the Bank stated that annual inflation fell below zero in August (-0.3% year-on-year). August’s result was mainly driven by lower prices for food due to falling prices of commodities in the global markets and the Russian embargo on food imports. The Bank also signaled that it would not rule out making a further adjustment of monetary policy at its 4-5 November meeting, “should the incoming data confirm a considerable risk of inflation remaining below its target of 2.5% plus/minus 1.0 percentage points.”

For 2014, panelists expect the policy rate to end the year at 2.06%. For 2015, the panel sees the rate ending the year at 2.35%.

Author:, Economist

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Poland Monetary Policy Chart

Poland Monetary Policy October 2014 1

Note: NBP Reference Rate in %.
Source: National Bank of Poland (NBP).

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