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Poland's central bank maintained its monetary policy reference rate at 2.0 percent but moved closer to cutting the rate if the country remains in the grip of deflation and economic activity in the country and surrounding countries slows further.
The National Bank of Poland (NBP) dropped its guidance from December that its 50 basis points rate cut in October and economic growth would limit this risk of inflation remaining below its 2.5 percent target but repeated that it would “not rule out further adjustment of monetary policy.”
The central bank pointed to the uncertainty surrounding the country's economy with economic growth in the fourth quarter of 2014 possibly slowing slightly as industrial output had almost stagnated in November while construction and assembly output continued to fall and growth in retail sales decreased. However, bank lending to firms and households continued to be steady.
Poland's Gross Domestic Product expanded by 0.9 percent in the third quarter from the second for annual growth of 3.3 percent, down from 3.5 percent in the second.
The unemployment rate rose slightly to 11.5 percent in December, the second month in a row of a rising jobless rate, but the NBP said data pointed to a further rise in corporate employment.
Polish consumer prices fell by 0.6 percent in November, the fifth consecutive month of deflation and below expectations. Most indices for core inflation also fell, the NBP said, confirming the lack of demand while a continued decline in producer prices illustrated the lack of cost pressures.
The National Bank of Poland issued the following statement:
In November, CPI inflation remained negative and was below expectations at -0.6% y/y. This was accompanied by a decrease in the majority of core inflation indices, which confirms the absence of demand pressure in the economy. The decline in producer priceshas also continued, indicating a lack of cost pressure in the economy. This is accompanied by very low inflation expectations of enterprises and households.
The Council decided to keep the NBP interest rates unchanged. The Council highlights that uncertainty regarding economic conditions in the environment of the Polish economy persists. If the expected period of deflation extends, which would increase the risk of inflation remaining below the target in the medium term, and incoming data confirm a slowdown in economic activity as well as weak growth in the environment of the Polish economy persists, the Council does not rule out further adjustment of monetary policy. ”
www.CentralBankNews.info