Wednesday, May 6, 2015

Poland holds rate, growth to limit too low inflation

    Poland's central bank maintained its monetary policy reference rate at 1.50 percent, as expected, saying deflation will continue in coming quarters but the expected acceleration of economic growth reduces the risk that inflation remaining below the bank's target in the medium term.
    The guidance by the National Bank of Poland (NBP), which said it was concluding its monetary easing cycle when it cut its rate by 50 basis points in March, is the same as in April.
    The NBP said economic activity remains stable - the same description used last month - and repeated that Gross Domestic Product growth in the first quarter of this year was probably slightly higher than the previous quarter.
    Poland's GDP expanded by 0.7 percent in the fourth quarter from the third quarter for annual growth of 3.3 percent, unchanged from the third quarter.
    Poland's consumer price inflation rate was minus 1.5 percent in March, the ninth consecutive month of deflation, compared with minus 1.6 percent in February.
    In March the NBP forecast 2015 inflation of minus 1.0 to 0.0 percent and 2016 inflation of minus 0.1 percent to 1.8 percent. The central bank targets inflation at a midpoint of 2.5 percent, within a tolerance range of 1.5 to 3.5 percent. Inflation has been below the lower bound since February 2013.

    The National Bank of Poland issued the following statement:

"The Council decided to keep the NBP interest rates unchanged:
reference rate 1.50% on an annual basis; lombard rate 2.50% on an annual basis;
deposit rate 0.50% on an annual basis;
rediscount rate 1.75% on an annual basis.
Growth of global economic activity remains moderate, with a slight acceleration expected in 2015. In the euro area economic growth remains relatively low, although incoming information signals a gradual improvement of economic conditions. In the United States, despite the weakening of GDP growth in 2015 Q1, the recovery is expected to continue. In turn, the economic outlook for Poland’s eastern trading partners, i.e. Russia and Ukraine, remains unfavourable.

After a sharp and long-lasting fall, global oil prices have risen slightly recently. This has weakened disinflationary forces in many countries. However, global price growth remains very low, and in many European economies it is negative. In these conditions, major central banks are keeping interest rates close to zero and the ECB is continuing its asset purchase programme, which is contributing to higher financial asset prices in many European countries.

In Poland, economic activity remains stable, with GDP growth in 2015 Q1 probably slightly higher than in 2014 Q4. Rising domestic demand fuelled by an improving labour market situation, good financial condition of enterprises and stable expansion in lending, remains the main driver of economic growth. In turn, the low, although accelerating, growth in demand from Poland’s main trading partners drags down economic activity in Poland.

Due to the moderate growth in demand and the continuing negative output gap, there is no demand pressure in the economy. At the same time, low commodity prices and moderate nominal wage growth are contributing to the continued lack of cost pressure. As a result, the annual growth rate of consumer and producer prices remains negative, and inflation expectations are very low.

In the opinion of the Council, the annual price growth will remain negative in the coming quarters, mainly due to the previously observed sharp fall in commodity prices. At the same time, the expected gradual acceleration of economic growth, amidst recovery in the euro area and good situation in the domestic labour market, reduce the risk of inflation remaining below the target in the medium term. Therefore, the Council decided to keep NBP interest rates unchanged.:


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