Poland maintains rate, sees rising core inflation

    Poland’s central bank left its reference rate steady at 1.50 percent, as expected, saying inflation will remain negative in coming months due to “depressed prices of global energy commodities” but core inflation should gradually rise, supported by stable economic growth amid improving economic activity in the euro area and favorable labor market conditions.
    The National Bank of Poland (NBP), which cut its rate by 50 basis points in 2015, added that a more comprehensive assessment of the outlook for inflation and growth will be possible after the monetary policy council sees the March inflation and growth forecast.
    At their previous meeting in January, some members of the bank’s monetary policy council called for a rate increase in coming months while others said rate cuts should be considered because growth in domestic demand is slow and consumer prices depressed.
    Eight of the council’s 10 members are due to leave office by the end of February as terms expire.
    In its November forecast, the central bank estimated deflation of minus 0.9-0.8 in 2015 and inflation of 0.4-1.8 percent in 2016.
    Poland’s headline inflation rate declined by an annual 0.5 percent in December, up from minus 0.6 percent in November while core inflation eased to 0.23 percent from 0.25 percent.
    The NBP, which targets inflation of 2.50 percent, plus/minus 1.0 percentage point, said there were no inflationary pressures due to the negative output gap and moderate wage growth, and inflation expectations remain very low.
    “However, the persisting deflation has not yet adversely affected decisions of economic agents,” it said.
    In its last forecast, the central bank estimated 2015 economic growth of 2.9-3.9 percent and forecast growth of 2.3 to 4.3 percent for 2016.
    In the third quarter of 2015, Poland’s Gross Domestic Product grew 0.9 percent from the second quarter and the central bank said estimates suggest that growth rose in the fourth quarter, as domestic demand, helped by stable consumption and rising investment, drove growth.
    The government’s statistical office has estimated real GDP growth in 2015 of 3.6 percent compared with 3.3 percent in 2014.
    Last month ratings agency Standard & Poor’s surprisingly cut Poland’s credit rating, arguing that the new conservative government had weakened the independence of key institutions.
    S&P also said it could lower the rating again if the independence of institutions like the central bank was further weakened.

    The National Bank of Poland issued the following statement: