Wednesday, June 5, 2013

Poland cuts rate another 25 bps as inflation falls further

    Poland's central bank cut its policy rates by a further 25 basis points, increasing this year's rate cuts to a total of 150 basis points, and said it would explain its decision at a press conference later today.
     The National Bank of Poland's (NBP) benchmark reference rate will be cut to 2.75 percent, the lombard rate to 4.25 percent, the deposit rate to 1.25 percent and the rediscount rate to 3.0 percent, the NBP said in a statement.
     In May, when the NBP also cut by 25 basis points, the central bank's monetary policy council said future policy decisions would depend on new data and the likelihood of inflation remaining "markedly below" the central bank's target.
    Poland's inflation rate fell to 0.8 percent in April from 1.0 percent in March, continuing the steady decline seen since June 2011 when it hit 5.0 percent.  
    The NBP targets inflation of 1.5 to 3.5 percent with a 2.5 percent midpoint. Minutes from the May meeting showed that most members of the 10-member policy council believe inflation will remain below the central bank's latest forecast for this year of 1.6 percent and some council members believe this justifies further monetary easing.

    Poland's Gross Domestic Product expanded by an annual 0.5 percent in the first quarter, down from 0.7 percent in the fourth quarter. Growth in 2012 slowed to 1.9 percent from 2011's 4.5 percent and the central bank has forecast growth slowing to 1.3 percent this year.
    As growth slowed last year, the NBP started cutting rates in November - a move that was widely criticized as being too late to counter the recession in the euro area.
   After cutting rates by 150 basis points, the central bank froze rates in April to evaluate the impact of its cuts and then started easing its policy again in May.


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