Poland again keeps reference rate at 4½% as inflation likely in check

By Susanna Moon

Chicago, Dec. 7 - National Bank of Poland's Monetary Policy Council said it again decided to keep the bank's reference rate unchanged at 4½% at its meeting on Tuesday and Wednesday. The bank last raised the rate by 25 basis points in June.

The bank said that in the medium term, inflation will be curbed by easing the country's demand with fiscal tightening, including reduced public investment spending and the interest rate hikes from the first half of the year, as well as the expected global economic slowdown.

Annual Consumer Price Index inflation rose to 4.3% in October, staying above the bank's inflation target of 2.5%. The rise was attributed to growing food and fuel prices. Core inflation eased while Producer Price Index inflation remained elevated, according to a bank press release.

The CPI will stay high given the sharp rise in global commodity prices and the zloty depreciation of recent months. The waning impact of VAT rate hikes and spikes in food and energy prices in the first half of the year will help lower inflation at the beginning of 2012, the release said.

The bank also noted concerns about Europe, with economic growth remaining weak in the third quarter and data pointing to more deterioration in business conditions there.

Tensions in the financial markets persist worldwide, the bank said, as the global economy slows and European countries tackle fiscal problems.

"The impact of the situation in the global financial markets on zloty exchange rate continues to be an upside risk to domestic price developments," the bank noted.

© 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.