Poland Money (ann. var. of M2 %)

Money in Poland

Central Bank stands pat in May

At its 9–10 May meeting, the National Bank of Poland (NBP) kept the key reference rate unchanged at 6.75%, as had been expected by markets. The NBP also kept the Lombard rate unchanged at 7.25%, the rediscount rate at 6.80% and the deposit rate at 6.85%.

The NBP decided to stand pat amid weakening economic activity and declining, albeit still high, inflation, and as it expects previous rate hikes to curb inflation further going forward. Meanwhile, inflation fell to 14.7% in April from 16.1% in March, mainly due to softer increases in prices for food and non-alcoholic beverages and energy. That said, it remained elevated amid continued pass-through effects. The Central Bank expects price pressures to continue to decline gradually due to weakening activity, lower international commodity prices and a decrease in credit growth due to previous monetary policy tightening.

In its communiqué, the NBP stated that its decisions would remain driven by incoming data and that it would “take all necessary actions in order to ensure macroeconomic and financial stability, including above all to bring inflation down to the NBP inflation target in the medium term”, including intervening in the foreign exchange market.

The next monetary meeting is scheduled for 5–6 June.

Commenting on the outlook, Rafal Benecki, an economist at ING, stated:

“We hold the view that there will be no conditions for interest rate cuts before the end of this year. Although the disinflation process has begun, we believe it will remain at uncomfortably high levels for an extended period. In particular, core inflation remains persistently high, and this is despite a two-quarter-long decline in consumption.”