NBP keeps interest rates on hold, expects inflation to remain moderate in quarters ahead

The Monetary Policy Council of the National Bank of Poland decided to keep the interest rates on hold on Wednesday. The reference rate was kept unchanged at 1.5 percent, while the Lombard rate, deposit rate and rediscount rate were kept on hold at 2.5 percent, 0.5 percent and 1.75 percent.

The MPC in a statement mentioned that the global economic conditions are indicating additional signs of rebound, especially in industry and international trade. It stated that the incoming data for Poland indicate towards a rebound in GDP growth this year. Rising consumer demand continues to primarily drive the economic growth, underpinned by increasing wages and employment, good consumer sentiment and disbursement of benefits.

Also, the conditions in industry and construction are improving that might point towards a gradual rebound in investment demand. The annual growth in prices of consumer goods and services after a considerable rise at the start of the year, has steadied at a moderate level. Meanwhile, core inflation, though gradually rising, stays low, which indicates towards still limited demand pressure. In spite of rising employment and wages, growth in unit labor costs stays moderate.

According to the Council, inflation in the quarters ahead is expected to stay moderate amid waning impacts of the past rise in global commodity prices, with just a gradual rise in domestic inflationary pressure stemming from rebounding domestic economic conditions.

The risk of inflation being continuously above the target in the medium term is restricted. The MPC affirmed its assessment that, given the available data and projections, the current interest rate level is conducive to maintaining the Polish economy on the sustainable growth path and maintaining macroeconomic balance.