Poland's central bank held its reference rate steady at 2.50 percent, as widely expected, but again pushed back any change in interest rates until the end of the third quarter of 2014 while it revised downward its forecast for inflation but raised its growth projections.
The National Bank of Poland (NBP), which cut rates by 225 basis points from November 2012 through July 2013, also said the gradual economic recovery was likely to continue in coming months but inflationary pressures will remain subdued.
After ending its easing cycle in July last year, the NBP said in September it would maintain rates at least until the end of 2013. But in November, the central bank said it would maintain rates at least until the end of June this year and it has now pushed back the timing for any rate rise until end-September.
"In the council's assessment NBP interest rates should be kept unchanged for a longer period of time, i.e. at least until the end of the third quarter of 2014," the central bank said.
In its latest monetary policy report, the central bank revised downward its 2014 inflation forecast to 0.8-1.4 percent, down from the November forecast of 1.1-2.2 percent, and the 2015 forecast to 1.0-2.6 percent from 1.1-2.6 percent. In 2016 the NBP expects inflation of 1.6-3.3 percent.
Poland's inflation rate was steady at 0.7 percent in January and December, well below the central bank's target of 2.5 percent, plus/minus one percentage point. Core inflation fell, the bank said, confirming that demand pressures are weak and inflation expectations are low.
Economic growth in Poland is accelerating, mainly due to higher exports with domestic demand also starting to rise due to accelerating consumption and investment, the central bank said. It added that industrial output and retail sales rose in January and business climate indicators suggest that the recovery will continue in coming quarters.
The central bank revised upwards its growth forecasts, with Gross Domestic Product seen expanding by 2.9 - 4.2 percent in 2014, up from November's 2.0 - 3.9 percent forecast, 2.7 - 4.8 percent in 2015, up from 2.1 - 4.5 percent previously, and GDP growing by 2.3 - 4.8 percent in 2016.
In the fourth quarter of 2013, Poland's GDP expanded by 0.6 percent for annual growth of 2.7 percent, the third consecutive quarter of accelerating growth.
Although the unemployment rate is still rising, hitting 14 percent in January from 13.4 percent in December, the central bank said the number of people working was higher than a year before in the fourth quarter. But the elevated level of unemployment is hampering wage pressures in the economy.