National Bank of Poland keeps reference rate unchanged at 4½%

By Jennifer Chiou

New York, Sept. 7 - National Bank of Poland's Monetary Policy Council announced that it again opted to leave the bank's reference rate unchanged at 4½%. The council meeting was held on Tuesday and Wednesday.

The council raised the rate to 4½% in June from 4¼% in May. The rate stood at 4% in April.

The council said that in Poland, data on gross domestic product in the second quarter of 2011 confirmed relatively high and stable growth in the first half of 2011, mainly driven by expanding domestic demand, fuelled by both rising private consumption and accelerated investment growth. However, data on economic activity in the first months of the third quarter signal a possibility of a slowdown in economic growth, in particular, of weaker growth in industry, the council said.

The monetary panel noted that since previous meetings, there have been further signs of weakening global economic activity, adding that in the second quarter, annual GDP growth in the United States declined and data on GDP in the previous quarters was revised downwards.

Given the increased risk aversion in the financial markets, the currencies of emerging economies, including the zloty, weakened, according to a bank release.

In the euro area and in some emerging economies, GDP growth also slackened in the second quarter, the release added. At the same time, consumer and corporate sentiment deteriorated in many countries, and inflation persisted at an elevated level.

The council said that the heightened risk of a global economic slowdown along with the persisting fiscal problems in some countries contributed to mounting tensions in the financial markets worldwide, and there was a significant fall in equity prices accompanied by a further decline in global commodity prices.

Heightened financial asset price volatility is also driven by the significant surplus of liquidity in the financial markets, related to the strongly expansionary monetary policy of the major central banks.

In the council's guidelines, the council maintained the key elements of its monetary policy strategy, including a permanent inflation target of 2.5%.

The Lombard rate remains at 6%, the deposit rate is 3%, and the rediscount rate is 4¾%.

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