Poland Monetary Policy April 2016


Poland: NBP holds reference rate at record low

April 6, 2016

Amid a lack of inflationary pressure in the economy, the National Bank of Poland (NBP) decided to keep its reference rate at the record low of 1.50% at its 5–6 April monetary policy meeting. The Bank has left the rate unchanged for over a year and April’s decision matched market analysts’ expectations. The decision comes despite large changes to the monetary policy council—eight of the ten members have been replaced since the start of the year—and against a backdrop of monetary easing in the region.

In its accompanying statement, the NBP outlined that the decisions come amid subdued global growth and uncertainty regarding the effects of a slowdown in emerging economies. The Bank pointed out that modest growth along with low prices for commodities have limited prices pressures globally and have even led to negative prices in certain regions including the Eurozone. As a result, the European Central Bank (ECB) eased its monetary policy in March. Regarding Poland, the NBP commented that growth continues to be supported by domestic demand, while the external sector continues to limit performance. The Bank added that consumer prices are lingering in negative territory, mainly due to external factors, but the Bank does not see this adversely affecting the economy. Looking forward, the Bank sees prices remaining negative but it expects stable growth to continue and, accordingly, decided to hold the policy rate.

The Bank’s decision to maintain rates comes in contrast to other central banks in the region, which have recently eased monetary policy. Poland has not experienced inflation since June 2014 and the inflation rate has undershot the NBP’s target of 2.5% for the past three years. These developments, along with a recent appreciation in the zloty, have led to an argument for an easing in monetary policy. However, a statement made at the press conference following April’s monetary policy council meeting, suggests that, at this time, easing is not in the cards. Marek Belka, President of the NBP, stated that, “there is no dramatic scenario of economic slowdown in sight that would convince the Monetary Policy Council to lower interest rates. I don't think one could say that the events of the last month have made an interest rate cut more likely.”

Against this backdrop, FocusEconomics Consensus Forecast panelists expect the policy rate to end 2016 at 1.40%. For 2017, the panel sees the rate ending the year at 2.09%.

Author: Angela Bouzanis, Senior Economist

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Poland Monetary Policy Chart

Poland Monetary Policy April 2016 1

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

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