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Poland Monetary Policy May 2018

Poland: NBP keeps rates intact in May

As widely expected by market analysts, the National Bank of Poland (NBP) kept the reference rate unchanged at a record-low 1.50% at its 15–16 May monetary policy meeting. In addition, the Bank held the Lombard rate unchanged at 2.50%, the deposit rate at 0.50% and the rediscount rate at 1.75%. It has been more than three years since the Bank last moved the reference rate.

Growth in the first quarter was robust and in line with the Bank’s projections, giving officials adequate space to leave rates intact. Domestic demand drove the expansion, fueled by strong wage growth and resilient employment figures, both of which bode well for inflationary pressures going forward. Currently, however, inflation remains moderate. In April, inflation came in at 1.6%, climbing back into the Bank’s 2.5% plus or minus 1.0 percentage point target range. Although higher global oil prices have been exerting some pressure in recent months, the Bank made clear that core inflation remained low.

Bank officials also emphasized that recent economic data points to a bright outlook. Speaking after the meeting, NBP chief Adam Glapinski gave his perspective, saying:

“When it comes to my predictions, […] it seems to me that, in all likelihood, there will be no reason to change the level of interest rates […] this year and throughout next year, or perhaps even longer than that—I am thinking of 2020.”

Moreover, fixed investment has only recently begun to recover, and officials have been hesitant to halt its further comeback. Barring any unforeseen circumstances, the Bank is likely to stay put over the coming quarters as its projections for moderating growth materialize and inflation slowly inches up towards its midpoint target. Most of our FocusEconomics Consensus Forecast panelists agree with this analysis, and the majority see the Bank holding fire on interest rates until next year.

The next monetary policy meeting is scheduled for 5–6 June.

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