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Poland Monetary Policy March 2021

Poland: Central Bank keeps rates unchanged in March

At its meeting on 3 March, the National Bank of Poland (NBP) decided to keep the reference rate at its historic low of 0.10%, marking the ninth consecutive hold and coming 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 stated that it will maintain its quantitative easing program by continuing to purchase government bonds in the secondary market. It will also continue to offer discount credit aimed at refinancing loans granted to businesses by banks.

The decision to stand pat largely reflected the Bank’s efforts to prioritize mitigating the economic impact of the ongoing pandemic, against the backdrop of within-target inflation. Surging Covid-19 infections in the country, coupled with stricter containment measures, caused GDP to fall in Q4 2020, and while activity is expected to bounce back this year, the scale and strength of the recovery remain uncertain due to the pandemic. Nevertheless, the Bank revised its GDP growth projections for 2021 up from 0.8%–4.5% to 2.6%–5.3%. On the price front, inflation edged up to 2.7% in January (December: 2.4%), thus remaining within the Bank’s target band of 1.5%–3.5%. In a similar fashion, the monetary authority bumped up its inflation forecasts for this year from 1.8%–3.2% to 2.7%–3.6%.

Looking ahead, the Bank’s policy stance will continue to support the economic recovery, which will also benefit from significant fiscal support and new EU funding. In addition, the Bank’s upward revision of its economic activity projections suggests a certain degree of confidence over the recovery process ahead.

The next monetary meeting is scheduled for 7 April.

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