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Poland Monetary Policy November 2020

Poland: Central Bank keeps rates unchanged in November

At its meeting on 6 November, the National Bank of Poland (NBP) stood pat, leaving the reference rate at its record low of 0.10%, marking the fifth consecutive hold and coming in line with market expectations. Furthermore, the NBP kept the lombard rate unaltered at 0.50%, the deposit rate at 0.00% and the rediscount rate at 0.11%. At the same time, the Bank reiterated 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 keep rates steady largely reflected the Bank’s efforts to mitigate the adverse impact of the Covid-19 health crisis and sustain the economic recovery. While available data for the third quarter points to a notable rebound in economic activity, the recent spike in new virus cases and the reintroduction of restrictions has heightened uncertainty and will weigh on the economy in Q4. Meanwhile, on the price front, a flash estimate showed inflation dropped to 3.0% in October (September: 3.2%), thus moving closer to the midpoint of the Bank’s target range of 1.5%–3.5%.

Looking ahead, the Bank’s monetary policy stance is set to remain largely expansionary, in order to cushion the fall in employment and support the recovery in activity, which will also benefit from robust fiscal support and new EU funding.

Commenting on the outlook for monetary policy, Rafal Benecki, chief Poland economist at ING, reflected:

“In our opinion, further easing is a matter of time. We see a high risk of a national lockdown. The MPC’s next steps may take various forms: (1) further asset purchases – the programme remains open, (2) strengthening the instruments facilitating credit creation, (3) possibly a symbolic rate cut, if the rebound of EUR/USD after the US elections continues to strengthen the Polish zloty.”

The next monetary policy meeting is scheduled for 2 December.

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