Poland - The NBP moves towards rate cuts The National Bank of Poland (NBP) left its key interest rate on hold at 2.5% at its monetary policy meeting today. However, it suggested that rates will be cut in the near-term. The Bank is clearly worried about soft output and inflation readings and the impact that the Ukraine crisis will have on the economy going forward. While the Q2 GDP reading was relatively robust PMI numbers have shown a clear downward trend and inflation has fallen below zero. In July the NBP had said that rates would stay on hold until at least September and so it probably did not want to move now in order to retain credibility and consistency. However, Governor Belka made it clear that monetary policy easing will be considered in the upcoming period. Part of this loosening is coming automatically via a slightly weaker zloty. However, the central bank is likely to cut rates at least once and possibly twice if the data remains this weak. Poland is already being hit by counter-sanctions from Russia on food (and it is as yet uncertain what will follow the EUs new sanctions to be announced this week). Indeed, it is impossible to assess how long the deterioration in relations with Russia will last. Hence, the outlook for policy is also rather unclear.
Posted on: Wed, 03 Sep 2014 16:55:57 +0000
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