Poland Monetary Policy


Poland: NBP leaves rate unchanged but is prepared to act soon

September 3, 2014

The National Bank of Poland (NBP) kept its reference rate unchanged at 2.50% at its 2–3 September monetary policy meeting. The decision was in line with market expectations. The reference rate has been kept unchanged since July of last year. The Bank decided to keep interest rates at the current low level despite growing concerns over an economic slowdown and inflation moving further away from the established target. Nonetheless, the Bank is prepared to cut rates as early as the following meeting in October if need be.

The Bank noted that the global economy is continuing to grow at a moderate pace. It pointed out that economic growth accelerated significantly in the U.S. in Q2, while growth stalled in the Euro area. In terms of the domestic economy, the Bank emphasized that there is a, “slowing momentum of economy growth.” GDP increased 3.3% annually in Q2, which was down slightly from the 3.4% expansion tallied in Q1. The weaker result was driven mainly by a negative contribution from the external sector. The Bank also stated that recent economic indicators, “point to a further slowdown in economic activity.”

Regarding price developments, the Bank stated that annual inflation dropped below zero in July due to a lack of both demand and cost pressures, and also acknowledged that inflation expectations are notably low. July’s negative result is obviously well below its target of 2.5% plus/minus 1.0 percentage points. The Bank emphasized that increased uncertainty regarding the outlook for economic activity has translated into higher uncertainty about the prospects of inflation returning to target. Despite these concerns, the Bank decided to keep interest rates unchanged. However, analysts suspect that the decision was far from unanimous, with several committee members likely voting for a rate cut. More importantly, the Bank clearly stated that it will, “start an adjustment of monetary policy” if the economic slowdown persists and the risk of inflation remaining below target in the medium term increases.

For 2014, panelists expect the policy rate to end the year at 2.43%. For 2015, the panel sees the rate ending the year at 2.93%.

Author:, Economist

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Poland Monetary Policy Chart

Poland Monetary Policy September 2014

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

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