Poland's central bank held its reference steady at 2.50 percent but pushed back any rate rise by another six months, saying it would maintain rates "at least until the end of the first half of 2014" as the latest forecast confirms low inflationary pressure and an expected moderate economic recovery.
At its previous meeting in September, the National Bank of Poland (NBP) said it would maintain its interest rate at "least until the end of 2013." It has cut the rate by 175 basis points this year, most recently in July when it said the cycle of easing had ended.
But last month NBP Governor Marek Belka said the bank could keep rates steady for longer than expected as the latest data showed that the economic recovery was slow without any inflation pressures. Financial market were also expecting the first interest rate increases in the second half of next year.
While the Polish economy is gradually accelerating and is expected to continue to recover in coming quarters, inflationary pressures will remain subdued, the NBP said.
In the latest forecast by the Economic Institute, which is used by the bank's council to decide on interest rates, inflation is forecast in a range of 0.9-1.0 percent this year, compared with the July forecast of 0.6-1.1 percent. In 2014, inflation is forecast at 1.1-2.2 percent compared with July's 0.4-2.0 percent, and in 2015 inflation is forecast at 1.1-2.6 percent compared with 0.7-2.4 percent.
In September, Poland's headline inflation rate eased to 1.0 percent from August's 1.1 percent, markedly below the central bank's target of 2.5 percent, and core measures also declined.
Poland's economy is starting to improve, with data from industry, construction and retail in the third quarter confirming "low, yet accelerating economic growth. At the same time, improving leading indicators point to gradual recovery continuing into quarters to come," the bank said.
But unemployment is still elevated, contributing to slow wage growth, and growth in lending to the private sector remains limited, the bank said.
The latest forecast calls for a 50-pecent probability of annual Gross Domestic Product growth of 1.0-1.5 percent this year, compared with 0.5-1.7 percent forecast in July, 2.0-3.9 percent in 2014, compared with 1.2-3.5 percent, and growth of 2.1-4.5 percent in 2015 as against 1.6-4.2 percent.
Poland's economy expanded by 1.9 percent in 2012 and in the second quarter GDP rose by 0.4 percent from the first quarter for annual growth of 0.8 percent, up from 0.5 percent.
www.CentralBankNews.info
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