Poland's central bank cut its monetary policy reference rate by 50 basis points to 1.50 percent, a move that was largely expected following last month's guidance by the National Bank of Poland (NBP) that it did not rule out further rate cuts if deflation continued.
The NBP's previous rate cut of 50 basis points was in October 2014 but since then the fall in consumer prices has deepened. Since the NBP embarked on a monetary easing cycle in November 2012, it has cut the benchmark rate by 325 points.
Polish consumer price inflation fell to minus 1.3 percent in January from 1.0 percent in December, the seventh consecutive month of deflation.
Inflation has now been below the NBP's target of 2.5 percent for 26 months and below the lower bound of its 1.5-3.5 percent tolerance range since February 2013.
The NBP will later today issue a statement about its decision and is also due to update its inflation and growth forecasts.
In addition to cutting the reference rate, the NBP also cut the deposit rate by 50 basis points to 0.50 percent, the lombard rate to 2.50 percent and the rediscount rate to 1.75 percent.
This year's strength in Poland's zloty currency against the euro has been worrying Polish policy makers with Marek Belka, NBP governor, signaling that the central bank was keeping an eye on zloty and was likely to act if there was further appreciation.
The zloty was quoted at 4.17 today, up 4.6 percent against the euro this year though slightly weaker than last week's close around 4.15 to the euro.
Poland's Gross Domestic Product expanded by 0.7 percent in the fourth quarter from the third quarter for annual growth of 3.10 percent, down from 3.3 percent in the third quarter.
On Tuesday Poland's Deputy Prime Minister Janusz Piechocinski told Reuters that the central bank should cut rates by more than 25 basis points, saying the country was in no risk of excessive credit growth and that there was "huge space here for such bold action."