Polish Interest Rates

No Changes

No Changes

The Monetary Policy Council (RPP) has decided to keep interest rates in Poland unchanged, according to an announcement by the National Bank of Poland (NBP). The following interest rate levels remain unchanged: the reference rate at 2.5% per annum; the Lombard rate at 4% per annum; the deposit rate at 1% per annum and the re-discount rate at 2.75% per annum. Maciej Przygórzewski, Senior FX Dealer at Internetowykantor.en and Currency One SA says: “The RPP previously announced interest rates will not be lowered in May. Markets expected this decision, because members of the Council emphasised the need to stabilize markets by maintaining constant interest rates for a longer time. The predictability of this body is a great advantage. Just a few years ago, the RPP was regarded as an institution with little predictability, which mainly took belated decisions. In fact, even the latest string of interest rate cuts were questioned because of their lateness. This does not change the fact that for many months, the Council has given a clear signal to markets about future movements, clearly gaining their trust. There could be an absence of changes until the end of the year. Many analysts believe March 2015 as a possible date for the first increase as there are a series of factors that make it pointless to raise interest rates for the time being. Firstly, there is no risk of inflation. Inflation projections do not raise any concerns, and inflation itself has long remained below targets. Secondly, there is low economic growth. Although the forecast for this year is 3%, this is still not the level required for greater Polish development. So why has the Council not lowered interest rates? This is down to, on the one hand, the ineffectiveness of previous decisions, and on the other, the situation in the East. The Ukrainian-Russian conflict is escalating which casts a shadow on economic growth, and lower interest rates are an incentive for capital to escape. The reason for this is the falling rate of return on investment; therefore capital will seek attractive locations after any reduction.”

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