Poland: Central Bank holds rates steady in June
At its meeting on 9 June, the National Bank of Poland (NBP) once again left the reference rate on hold at 0.10%, which was in line with market 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 stand pat was chiefly driven by the Bank’s efforts to continue sustaining the economic recovery, despite a backdrop of intensifying price pressures. Although economic conditions improved in Q1, as indicated by a smaller decline in GDP, the recovery remains uneven across sectors. Moreover, while the Bank expects the recovery to pick up further in the coming quarters, uncertainty remains high due to the pandemic. On the price front, inflation climbed further above the upper bound of the Bank’s 1.5%–3.5% target range in May amid higher fuel and food prices—factors independent from domestic monetary policy. While the Bank acknowledged that inflation is set to remain above the upper ceiling of the target band in the coming months, it considers it a temporary price shock and sees price pressures easing next year. That said, much depends on the strength of the economic recovery and the labor market situation.
Going forward, despite intensifying inflationary pressures, the Bank’s monetary policy stance is expected to remain broadly expansionary in order to support the economic recovery, with any tightening of measures likely still some time away.
The next monetary meeting is scheduled for 8 July.