Poland national bank sees weak GDP cutting inflation, minutes say

By Richard Connell

New York, July 23 - The Monetary Policy Council of the National Bank of Poland, seeing a continued decline in GDP growth bringing down inflation, cut its reference rate by 25 basis points to 3½% at its meeting on June 24, according to minutes released by the bank.

The committee examined data which showed that the GDP growth in Poland declined to 0.8% on a year-to-year basis, reflected particularly in declining industrial output and weak growth in domestic construction.

The committee also forecast that GDP growth would continue to decline in the coming quarters, as it expects a continued decline in economic activity in the euro zone in 2009.

Inflation fell to 3.6% in May, remaining, however, above both the inflation target of 2½% and the upper limit for deviation of 3½%.

Although the forecasts for inflation show it declining for the medium-term, some members pointed out that inflationary risks exist, especially regarding food and commodity prices.

While some members argued to keep the interest rate unchanged based on the uncertainty regarding inflation and the volatility of the zloty exchange rate, the majority voted to lower the rate to 3½% in view of the forecasts of declining inflation.

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