Poland cuts key rate by 25 bps to 4.25%

    Poland's central bank cut its reference interest rate by 25 basis points to 4.25 percent, as widely expected, along with other key bank rates. The bank's Monetary Policy Council will explain its decision at a news conference later today.
    The National Bank of Poland (NBP) has now cut its benchmark rate by a net 50 basis point this year. In February the NBP cut its rate but then raised it in May in response to inflationary pressure. But then the bank cut rates in November in response to the economic fallout from the euro zone debt crises.
    The rate cut had been widely flagged by Polish central bankers and some economists had expected the bank may even cut rates by more than 25 basis points.
    Last month the central bank said it would cut rates further if "incoming information confirm a protracted economic slowdown, and should the risk of increase in inflationary pressure remain limited."
    Poland's economy, which expanded by 4.3 percent in 2011, has been deeply affected by Europe's economic crises and its Gross Domestic Product rose by only 0.4 percent in the third quarter from the second for annual growth of 1.4 percent, down from 2.5 percent in the second quarter.
    The NBP last month cut its 2012 growth forecast to 2-2.6 percent, down from July's forecast of 2.2-3.6 percent. It forecasts 2013 growth of 0.5-2.5 percent.

    Poland's inflation rate has also been falling from 4.2 percent in 2011. The headline inflation rate eased to 3.4 percent in October, down from 3.9 percent in September and the central bank said last week that its survey of household inflation expectations fell for the third month in November.
    The average inflation rate expected by Polish consumers over the next year fell to 3.6 percent, down from 3.8 percent in October,  4.1 percent in September and 4.4 percent in August.
    The NBP targets annual inflation of 2.5 percent, plus/minus one percentage point.
    In addition to its reference rate, the central bank cut its Lombard rate by 25 basis points to 5.75 percent, the deposit rate to 2.75 percent and the rediscount rate to 4.50 percent.
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