No rate hike due to falling GDP growth argues rate-setting body

The rate-setting body predicted that Poland's GDP growth weakened in Q3 2022 and will continue to decline in the coming quarters. Tytus Żmijewski/PAP

Poland's rate-setting body said on Wednesday its decision to put interest rates on hold was due to a forecast decline in economic growth and consumer demand which should help to reduce the record-high inflation.

In a statement issued after its decision to put all interest rates on hold in October, which broke the one-year-long hike cycle, the Monetary Policy Council (RPP) said that "the hitherto significant monetary policy tightening by NBP and the expected economic activity growth slowdown, which in part stems from external shocks, will contribute to curbing demand growth in the Polish economy, which will support a decline in inflation in Poland towards the NBP inflation target."

The NBP's target range for inflation is 2.5 percent plus/minus one percentage point.

The RPP also argued that the external shocks, including the high prices of commodities, especially energy and food, are beyond the reach of the RPP's actions and said that "the return of inflation to the NBP's inflation target will be gradual," without specifying any expected time frame.

The rate-setting body predicted that Poland's GDP growth weakened in Q3 2022 and will continue to decline in the coming quarters.

"Further decisions of the Council will depend on incoming information regarding perspectives for inflation and economic activity, including the impact of the Russian military aggression against Ukraine on the Polish economy" the RPP concluded.

The RPP's Wednesday decision means that Poland's main reference rate remains at 6.75 percent despite CPI (Consumer Price Index) hitting 17.2 percent year on year in September, the highest level in 25 years.