National Bank of Poland decides risks of increased interest rates outweigh rewards, minutes say

By Angela McDaniels

Tacoma, Wash., Sept. 23 - Some members of the National Bank of Poland's Monetary Council sought to raise interest rates at the council's Aug. 24 meeting, but the motion did not pass, according to minutes released by the bank Thursday.

As previously reported, the reference rate was left unchanged at 3½%. The council has left the interest rate unchanged at 14 consecutive meetings.

According to the minutes, some council members argued that increasing interest rates was justified given the increased momentum in Poland's recovery and the possibility that GDP growth could contribute to a rise in inflationary pressure.

Moreover, according to those council members, an increase in interest rates would contain the risk of a rise in inflation expectations and help increase the savings rate and, as a consequence, contribute to sustained economic growth over the longer term.

In addition, some council members argued that in order to tighten monetary policy, an increase in the required reserve rate might be justified.

Other council members pointed to a continuing adverse growth outlook in the external environment of the Polish economy and said there were no clear signals of further acceleration in the domestic economic growth.

Those members said that the currently low inflationary pressure and recent weakening of factors contributing to a rise in inflationary pressure justified keeping the interest rates unchanged. They also indicated that a rise in interest rates could increase the risk of a too-quick appreciation of the zloty.

Some council members argued that an increase of interest rates could weaken the recovery of economic growth in Poland too much.

Motions were put forward to raise interest rates and the required reserve rate by 50 basis points each, but the council ultimately kept them unchanged In addition to the 3½ reference rate, the lombard rate is 5%, the deposit rate is 2%, the rediscount rate is 3¾% and the discount rate is 4%.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.