The National Bank of Poland (NBP), which cut rates by 50 basis points in 2012, also cut its other rates by 25 basis points, pushing the lombard rate to 5.25 percent, the deposit rate to 2.25 percent and the rediscount rate to 4.0 percent.
The central bank will release further details about its decision later today.
Earlier today, the leader of Poland's junior coalition partner, the Polish Peasant's Party, told broadcaster TVN CNBC that the central bank had been too cautious in cutting interest rates, a criticism that has often been leveled against the bank.
Last year the NBP surprised financial markets when it raised rates in May despite the deepening economic slowdown in Europe from the sovereign debt crises. It finally reversed the rate rise in November when it started its current easing cycle.
In the third quarter of last year, Poland's Gross Domestic Product expanded by only 0.4 percent from the second quarter's 0.2 percent quarterly rise, for annual growth of 1.4 percent, down from the second quarter's 2.3 percent and the first quarter's 3.6 percent.
Economists are predicting that growth decelerated to just over 2 percent in 2012 and will slow further to some 1.5 percent in 2013, below the government's 2.2 percent forecast.
This is sharply below 2011's 4.3 percent and the International Monetary Fund's forecast of 2.4 percent growth for 2012 and 2.1 percent this year.
Poland's inflation rate eased further to 2.4 percent in December, the lowest rate of the year, and down from November's 2.8 percent.
The central bank targets inflation of 2.5 percent, plus/minus one percentage point, and expects the target to be reached this year. In 2014 inflation is forecast to drop further to 1.5 percent.
Last month the central bank said it did not rule out further rate cuts if the economic slowdown is protracted and there are limited risks of higher inflationary pressures.
Poland does not rule out more rate cuts if economy slows
Poland's central bank, which earlier today cut its policy rate for the third time in a row, said it did not rule out further rate cuts if the economic slowdown is protracted and there are limited risks of higher inflationary pressures.
The National Bank of Poland's (NBP) warning is slightly less hawkish than its statements from November and December when it said it "will" ease policy if data confirmed a protracted economic slowdown.
The NBP's Monetary Policy Council said new data had confirmed a "considerable slowdown" and this was limiting wage and inflationary pressures.
The central bank expects economic growth to remain moderate in coming quarters and this poses the risk of inflation falling below the bank's target. But today's rate cut should help support economic activity and limit this risk.
"The Council does not rule out further monetary policy easing should the incoming data confirm a protracted economic slowdown and should the risk of increase in inflationary pressure remain limited," the NBP said.
Earlier today the central bank cut its reference rate by 25 basis points to 4.0 percent. Its other interest rates were also cut by 25 basis points. Last year the central bank reduced rates by a net 50 basis points, cutting both in November and December.
The bank said data showed that global economic activity was still weak in the fourth quarter of last year and this weak activity was conducive to reducing inflation in many countries.
Although financial market sentiment had improved recently, Poland's economic activity remains weak, with industrial and construction output down in November and annual growth in retail sales in real terms was only just slightly above zero.
Poland's third quarter Gross Domestic Product rose by only 0.4 percent from the second quarter with the annual growth rate falling to 1.4 percent from 2.5 percent in the third quarter and 3.5 percent in the first quarter. In 2011 Poland's economy expanded by 4.3 percent.
The central bank said both household and corporate lending growth had continued to weaken and unemployment is continuing to rise.
The National Bank of Poland's (NBP) warning is slightly less hawkish than its statements from November and December when it said it "will" ease policy if data confirmed a protracted economic slowdown.
The NBP's Monetary Policy Council said new data had confirmed a "considerable slowdown" and this was limiting wage and inflationary pressures.
The central bank expects economic growth to remain moderate in coming quarters and this poses the risk of inflation falling below the bank's target. But today's rate cut should help support economic activity and limit this risk.
"The Council does not rule out further monetary policy easing should the incoming data confirm a protracted economic slowdown and should the risk of increase in inflationary pressure remain limited," the NBP said.
Earlier today the central bank cut its reference rate by 25 basis points to 4.0 percent. Its other interest rates were also cut by 25 basis points. Last year the central bank reduced rates by a net 50 basis points, cutting both in November and December.
The bank said data showed that global economic activity was still weak in the fourth quarter of last year and this weak activity was conducive to reducing inflation in many countries.
Although financial market sentiment had improved recently, Poland's economic activity remains weak, with industrial and construction output down in November and annual growth in retail sales in real terms was only just slightly above zero.
Poland's third quarter Gross Domestic Product rose by only 0.4 percent from the second quarter with the annual growth rate falling to 1.4 percent from 2.5 percent in the third quarter and 3.5 percent in the first quarter. In 2011 Poland's economy expanded by 4.3 percent.
The central bank said both household and corporate lending growth had continued to weaken and unemployment is continuing to rise.
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