Poland: Central Bank keeps rates unchanged in February
At its meeting on 3 February, the National Bank of Poland (NBP) once again decided to maintain the reference rate at its historic low of 0.10%. The decision marked the eighth hold in a row and came in line with market analysts’ expectations. The NBP also kept the lombard rate at 0.50%, the deposit rate at 0.00% and the rediscount rate at 0.11%. Moreover, the Bank reaffirmed its commitment to its quantitative easing program, with the continued purchasing of government bonds in the secondary market. It will also continue to discount credit aimed at refinancing loans granted to businesses by banks.
The decision to hold rates steady largely reflected the Bank’s efforts to mitigate the impact of the ongoing pandemic on economic activity. The sharp rise in new Covid-19 cases and the tightening of restrictive measures in Q4 will have weighed heavily on the economy in that period, particularly in the services sector. That said, the overall decline was likely smaller than the contraction seen in Q2 2020. Meanwhile, on the price front, inflation ended the year at 2.4%, thus landing slightly below the midpoint of the Bank’s target band of 1.5%–3.5% and giving the Bank further room to keep rates at their all-time low.
Going forward, the Bank’s monetary policy stance is set to remain broadly accommodative in order to support the economic recovery, which will also benefit from substantial fiscal support and new EU funding.
Reflecting on the outlook for monetary policy, Kevin Daly and Tadas Gedminas, economists at Goldman Sachs, commented:
“We continue to expect a prolonged period of rate stability in Poland and for the NBP to delay any tightening until after the completion of the MPC’s current term (ending in early 2022), with risks skewed towards rate cuts in the near term. At the same time, we think that the NBP could step up both its government bond purchases and FX interventions to provide further accommodation.”
The next monetary meeting is scheduled for 3 March.