Poland Monetary Policy


Poland: NBP leaves rate unchanged while acknowledging weak recovery and low inflation

July 2, 2014

The National Bank of Poland (NBP) kept its reference rate unchanged at 2.50% at its 1–2 July monetary policy meeting. The decision was in line with market expectations and marked the 11th consecutive meeting in which no change was made. The Bank explained that keeping interest rates at the current low level is necessary to support domestic economic growth and to help inflation return to the established target.

The Bank noted that the global economy is continuing to grow at a moderate pace. It pointed out that conditions are improving in the U.S. after a contraction in the first quarter, while recovery has been slow in the Euro area and major emerging economies. In terms of the domestic economy, the Bank emphasized that the gradual recovery is continuing, albeit at a slower pace. Data show that growth in industrial output, construction and retail sales was weaker than in previous months in May. Moreover, the Bank explained that, “a recent decline in some business climate indices points to a possible slowdown in economic recovery.” Meanwhile, although there have been continued improvements in the labor market, unemployment remains elevated.

Regarding price developments, the Bank stated that inflation was unexpectedly low at 0.2% in May, which is well below its target of 2.5% plus/minus 1.0 percentage points. After considering scenario projections made by the Bank’s own Economic Institute, the Bank concluded that, “in the coming months inflation will remain very low and may temporarily fall below zero.” Moreover, while gradual economic recovery and improvements in the labor market should support increasing inflation, uncertainty persists regarding the strength of recovery and therefore prospects for inflation returning to the target. As a result, the Bank decided to keep interest rates unchanged. The Bank did not indicate for how long rates would be kept at this level, after having declared in previous meetings that there would be no change at least until the end of Q3 2014. The removal of the forward guidance reference opens the possibility for a rate cut in the future.

For 2014, panelists expect the policy rate to end the year at 2.56%. For 2015, the panel sees the rate ending the year at 3.21%.

Author:, Economist

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Poland Monetary Policy Chart

Poland Monetary Policy July 2014

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

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