National Bank of Poland sees economic growth gradually slowing; holds rates steady

By Jennifer Chiou

New York, Aug. 27 - The National Bank of Poland's Monetary Policy Council held interest rates steady, saying data confirm earlier signals suggesting that the economic growth is gradually slowing down.

Once again, the monetary policy council held its reference rate at 6%, the lombard rate at 7.5%, the deposit rate at 4.5% and the rediscount rate at 6.25%.

The bank noted that despite the slowing the Polish economy is still in a period of growth encompassing most of its sectors.

The council added that at the same time, information on labor market developments points to a sustained high growth of wages and a continuously unfavorable relation between wage and labor productivity growth.

Both the national accounts data and other information concerning economic activity in the euro area indicate a stronger-than-expected decline in GDP growth in that region, according to the council release.

In July, the Monetary Policy Council said that the annual growth of consumer prices in Poland rose to 4.8%, remaining above the National Bank of Poland's inflation target of 2.5% and also above the upper limit for deviations from the target set at 3.5%.

The rise in inflation primarily resulted from increased annual growth of prices of food, energy and some services, the council said, noting that it maintains its assessment that in the coming months, inflation will continue above the upper limit for deviations from the inflation target, which will, to a large extent, be the result of high annual growth of administered prices and food prices.

In the council's assessment, in the coming quarters, the pressure on wage increases will probably persist, though the gradually slowing economic growth, weakening labor demand and deteriorating financial results of enterprises should be easing the wage pressure and, consequently, also the inflationary pressure.

The council added that in the medium term, easing of the inflationary pressure may be supported by the considerable slowdown in the global economy and, consequently, also by a decline in economic growth in Poland.

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