Poland Monetary Policy


Poland: NBP keeps reference rate unchanged

November 5, 2014

The National Bank of Poland (NBP) kept its reference rate unchanged at 2.00% at its 5 November monetary policy meeting. The decision came as a surprise to the markets as they had expected a 25-basis point cut given that the monetary authority previously announced a downward revision to its GDP projections for both this year and next.

In its accompanying statement, the Bank pointed out that global economic growth is still moderate. According to the Bank, the U.S. economy is continuing to recover and its outlook appears to be positive, while growth in the Euro area remains subdued and its GDP projections have been revised downward recently. On the domestic front, the NBP noted that economic activity deteriorated in the third quarter, dragged down by sluggish growth in the industrial sector and a weak external sector driven by low levels of demand in the Euro area. Accordingly, NBP growth projections for 2014 were revised downward from between 3.2% and 4.1% in July to between 2.9% and 3.5% in November. For 2015, the Bank downgraded GDP forecasts from between 2.6% and 4.5% to between 2.0% and 3.7%.

Regarding inflation, the Bank stated that annual inflation remained negative in September, which was mainly due to lower prices for oil in the global markets. Moreover, the decision to maintain the reference rate unchanged was mainly due to the fact that the Bank believes that the low inflation figures are mainly due to temporary external factors, and, to a much lesser extent, from domestic sources. As the Bank pointed out, “the October adjustment of monetary policy and the stable, despite some slowdown, economic growth limit the risk of inflation remaining below the target in the medium term.” In line with this statement, the NBP increased its annual inflation projection for 2014 to a range of between 0.0% and 0.2% (July: between -0.1% and 0.4%). For 2015, the Bank expects annual inflation of between 0.4% and 1.7%.

Although it has kept its reference rate unchanged, the Bank also pointed out that, “uncertainty regarding the economic conditions in the environment of the Polish economy persists. Therefore, the Council does not rule out further adjustment of monetary policy, should the incoming data point to a risk of deterioration in economic growth outlook.”

FocusEconomics Consensus Forecast panelists expect the policy rate to end 2014 at 1.82%. For 2015, the panel sees the rate ending the year at 1.97%.

Author:, Economist

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Poland Monetary Policy Chart

Poland Monetary Policy November 2014

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

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