Poland: Central Bank stands pat in May
At its meeting on 5 May, the National Bank of Poland (NBP) once again kept the reference rate unchanged at 0.10%, which was in line with market expectations. The NBP also left the lombard rate at 0.50%, the deposit rate at 0.00% and the rediscount rate at 0.11%. Moreover, 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 leave rates on hold largely reflected the Bank’s efforts to continue supporting the economic recovery. While available data suggests firming activity in Q1, economic conditions remain starkly uneven across sectors. Moreover, any further prolongation of the health crisis could hamper momentum ahead. On the price front, inflation overshot the upper bound of the Bank’s 1.5%–3.5% target band in April chiefly owing to higher fuel and food prices—factors independent from domestic monetary policy. Meanwhile, although the Bank sees price pressures intensifying further in the coming months, it expects inflation to drop in 2022 as temporary price shocks fade. That said, much depends on the strength of the economic recovery and the labor market situation.
Looking ahead, despite intensifying inflationary pressures, the Bank’s monetary policy stance is expected to remain largely accommodative in order to support the economic recovery, with any tightening of measures likely still some time away.
Reflecting on the outlook for monetary policy, Kevin Daly and Tadas Gedminas, economists at Goldman Sachs, commented:
“We think that the NBP will continue to downplay the current inflation overshoot, and our baseline expectation remains that the NBP will not raise rates at least until the end of the current Council’s term (the terms of seven Council members expire in 2022Q1, and Governor Glapinski’s at end-2022Q2).
The next monetary meeting is scheduled for 9 June.