Interest rates unchanged, contrary to expectations

photo - Glow Images/East News

The reference rate remains at 2.00 percent after a 0.5 percentage point cut in October, the lombard rate is at 3.00 after it was slashed by 1 percentage point last months and the remaining two rates, deposit and rediscount are at 1 percent and 2.25 percent respectively.

The council said that economic growth remains stable despite a temporary slowdown and that last month's rate reduction seems to limit the risk of low inflation. It however did not rule out further monetary policy easing in the future.

“The council's decisions are surprising and often volatile,” Adam Czerniak, chief economist at Polityka Insight told Polish Radio.

“If I were to guess what will happen before the end of this year, I would say there will be no more rate cuts. But we may expect a reduction in the first quarter of 2015.”

Czerniak added that the Polish economy needs further stimulation. “The question remains, however, whether a rate cut would be efficient in the present macroeconomic environment,” he said.

In his opinion, further monetary policy easing would not have a strong effect on lending and would not strongly impact economic growth. “The current macroeconomic situation in Poland is most influenced by what is happening in the euro zone, especially in the German economy,” he said.

Małgorzata Starczewska-Krzysztoszek, chief economist at employer organization Confederation Lewiatan said she is worried about the unpredictability of the Monetary Policy Council's decisions.

“Institutions of this kind worldwide try to send out signals that allow the market, businesses and others who need it to gain knowledge about the future monetary policy in a six-month perspective at least,” she said. (kw)