Poland's central bank continued to cut interest rates earlier today, saying economic growth is expected to remain moderate, even if it picks up in coming quarters, and this will restrain inflation.
The National Bank of Poland (NBP), which has cut rates by 150 basis points since embarking on an easing cycle in November 2012, said these rate cuts "will allow inflation to run close to target in the medium term and at the same time supports recovery of the Polish economy."
The bank cut its key rate by a larger-than-expected 50 basis points earlier today to 3.25 percent in light of the risk that inflation may run below the bank's target in the medium term. The NBP targets inflation of 2.5 percent target, plus/minus one percentage point.
"In the opinion of the Council, incoming data confirm persistently low economic growth in
Poland, no wage pressure and low inflationary pressure. Economic activity may gradually
improve in the coming quarters. However, GDP growth will probably remain moderate,
which will continue to contain inflationary pressure," the bank said in a statement.
The NBP said data point to low economic growth early this year with rising unemployment holding back wage growth and household and corporate lending subdued.
Under the bank's latest forecasts, Poland's Gross Domestic Product is expected to grow at an annual rate of between 0.6-2.0 percent in 2013, down from the November forecast of 0.5-2.5 percent, and between 1.4 and 3.7 percent in 2014, compared with 1.1-3.5 percent. In 2015, the forecast looks for growth of 1.9-4.4 percent.
In the fourth quarter of last year, Poland's Gross Domestic Product rose by 0.2 percent from the third quarter for annual growth of 1.1 percent, down from 1.8 percent. In 2012 economic growth was estimated to have declined to 2.0 percent from 4.3 percent in 2011.
Inflation in January fell more than expected to 1.7 percent from 2.4 percent in December and core inflation also remained low, which the "confirms limited demand pressure in the economy," the bank said, adding that inflationary expectations decreased further. The bank said there is a 50 percent probability of inflation being 1.3-1.9 percent in 2013, down from the November forecast of 1.8-3.1 percent, and between 0.8-2.4 percent in 2014 and between 0.7 and 2.4 percent in 2015.