Poland holds rate, repeats steady rate until end-Q3

    Poland's central bank held its reference rate steady at 2.50 percent, as widely expected, and confirmed its guidance that "interest rates should be kept unchanged for a longer period of time, i.e. at least until the end of the third quarter of 2014."
    In March the National Bank of Poland (NBP) pushed back its time frame for any rate change to at least the end of September from the end of the second quarter due a lower inflation forecast and the potential impact of the conflict between neighboring Ukraine and Russia.
    The NBP, which cut its rate by a total of 225 basis points from November 2012 through July 2013, said the gradual economic recovery is likely to continue in coming quarters while inflationary pressures will remain subdued.
    Poland's headline inflation rate was steady at 0.7 percent in March and February, markedly below the central bank's 2.5 percent target, plus/minus one percentage point. Core inflation also remained low, the bank said, with producer prices continuing to fall and inflation expectations low.
    Recent data show that domestic economic activity is continuing to recover, the bank said, citing a slower-than-expected rise in industrial output and retail sales in March, a pick-up in construction and assembly output, while business climate indicators still point to further activity growth in coming quarters despite a weakening in March.

    The recovery is improving labour market conditions, but the unemployment rate is still elevated, holding back wage pressures in the economy, the bank said.
    Poland's Gross Domestic Product rose by 0.6 percent in the fourth quarter from the previous quarter for annual growth of 2.7 percent, up from 2.0 percent in the third quarter. The unemployment rate eased to 13.5 percent in March from 13.9 percent in February and 14.0 percent in January.
    In its latest monetary policy report, the NBP forecast inflation this year of 0.8 percent to 1.4 percent, rising to 1.0 to 2.6 percent in 2015. Its next forecast will be issued in July.
    The economy is forecast to grow by 2.9 percent to 4.2 percent this year, up from 1.6 percent in 2013, and 2.7 to 4.8 percent in 2015.

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