National Bank of Poland stands pat, likely to keep rates on hold until 2017-end

The Monetary Policy Council of National Bank of Poland yesterday decided to keep its interest rates on hold. The central bank left its benchmark reference rate at 1.5 percent, consistent with market expectations, and thereby continuing with its wait-and-see approach. According to a Societe Generale research report, the NBP is expected to keep rates on hold until the end of 2017. Moreover, there is a risk of change to the monetary policy stance inflation accelerates more than 1.5 percent in the first quarter.

The central bank, in its post meeting statement, mentioned that the global economic growth continues to be moderate along with signs of recovery in global industry. According to the central bank, the fourth quarter economic growth of Poland is likely to have come in weak. But the monthly data hints certain rebound in economic activity in the recent past. Rising consumer demand, underpinned by an increase in employment and wages, upbeat consumer confidence and child benefit payments have been mainly driving the economic growth.

Meanwhile, the GDP growth was restricted by a decline in investment, caused to a greater degree by temporarily lower use of EU funds following the completion of the earlier EU financial perspective. On the other hand, annual growth in prices of consumer goods and services has been rising. According to the council, price growth is expected to rise in the months ahead, but it would continue to be moderate.

Commodity prices have been higher as compared to a year ago; therefore price growth would be underpinned by anticipated acceleration in economic growth in the midst of a gradual rise in investment growth rate and a stable growth in consumption. The Council has affirmed its assessment that the present level of interest rates is conducive to keeping the Polish economy on the sustainable growth path and maintaining macroeconomic balance.