Poland’s Monetary Policy Council kept the interest rates unchanged

The reference rate remains at 1.50%, lombard rate at 2.50%, deposit rate at 0.50%, and rediscount rate at 1.75%. The MPC wrote in its statement that “Global economic conditions remain favorable, although incoming data suggest a weakening in some economies. In the Eurozone, GDP growth declined in Q3’18, and incoming data indicate a gradual economic slowdown. In the United States, GDP data for Q3’18 confirmed that economic conditions in this country are still very strong. In turn, in China activity growth is gradually slowing.”

Poland’s MPC reminds that uncertainty about the global economic outlook persists, which has an adverse effect on the prices of some assets in the international financial markets. At the same time, global oil prices have fallen sharply in the recent period. Inflation is still elevated in many countries due to the earlier increase in energy prices.

According to National Bank of Poland (NBP) core inflation in the environment of the Polish economy, including the Eurozone, remains moderate. “The preliminary GDP data for Q3’18 point to a strong economic conditions. GDP growth is still driven by rising — albeit at a slightly lower rate than in the previous quarters — consumption, that is fueled by increasing employment and wages, as well as very high consumer sentiment. In Q3’18, this was accompanied by a marked rise in investment. Amid relatively high growth of domestic demand and the weakening of economic conditions in Poland’s external environment, net exports had a negative contribution to GDP growth,” writes the Poland’s MPC.

In the MPC’s assessment, current information points to a relatively favorable outlook for economic conditions in Poland, although a gradual slowing in GDP growth is expected in the years ahead. In 2019 inflation might be increased by rising energy prices, i.e. factor beyond the control of the MPC. The scale of energy price growth in 2019 will probably be limited by the fall in oil prices seen in recent months. In the medium term, in turn, the expected slowdown in economic growth will have a dampening effect on inflation. Consequently, in the monetary policy transmission horizon inflation will remain close to the target.

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