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Poland Monetary Policy June 2018

Poland: NBP on hold again in June

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 5–6 June 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.

Strong first-quarter growth gave officials adequate space to leave rates intact. Domestic demand drove the expansion, fueled by robust wage growth and resilient employment figures, both of which bode well for inflationary pressures going forward. Currently, however, inflation remains moderate. Inflation came in at 1.7% in May, inching further into the Bank’s target band of 2.5% plus or minus 1.0 percentage point. Although higher global oil prices have been exerting some pressure in recent months, the Bank made clear that core inflation remains low.

Bank officials have stressed that recent economic data bodes well for the outlook. Barring any unforeseen circumstances, policymakers are likely to stay put over the coming quarters as their projections for moderating growth materialize and inflation slowly inches up towards the Bank’s midpoint target. Moreover, NBP chief Adam Glapinski recently noted that rates could likely go unchanged into 2020. Meanwhile, fixed investment has only recently begun to recover—and officials are unlikely to halt its early-stage comeback. 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 10–11 July.

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