Poland c.bank leaves interest rates unchanged

Poland’s central bank, the National Bank of Poland (NBP) left its interest rates unchanged on Wednesday.

The Monetary Policy Council decided to maintain reference rate at 5.75 per cent, lombard rate at 6.25 per cent, deposit rate at 5.25 per cent, rediscount rate at 5.80 per cent, and discount rate at 5.85 per cent.

The Polish economy continues its gradual recovery, with GDP growth reaching 3.2 per cent year-over-year in the second quarter of 2024. Consumption demand has been a primary driver of this growth, while retail sales and industrial production have shown increases in recent months. However, construction and assembly output have declined.

The labour market remains robust, with low unemployment and a high number of employed individuals. Wage growth remains elevated, although employment in the enterprise sector has decreased slightly.

Inflation has risen, reaching 4.3 per cent in August from 4.2 per cent in July. This increase is primarily due to higher administered energy prices and, to a lesser extent, food and beverage prices. However, inflation excluding food and energy has remained relatively stable. Producer prices have continued to decline.

The Council assesses that despite the economic recovery, demand and cost pressures in the Polish economy remain relatively low. This, combined with weakened global economic conditions and lower inflation abroad, is curbing domestic inflation. The appreciation of the zloty exchange rate is also helping to contain inflation.

However, wage growth, particularly in the public sector, is stimulating price pressure. Additionally, the rise in energy prices is significantly affecting inflation and will continue to do so in the coming quarters. Once the impact of higher energy prices fades, inflation is expected to return to the NBP’s medium-term target. However, inflation expectations remain uncertain.

The Council decided to maintain the NBP interest rates at their current levels. The Council believes that these rates are conducive to achieving the NBP’s inflation target in the medium term.

Attribution: The National Bank of Poland (NBP)