No rate hike due to global slowdown says rate-setting body

The RPP's Wednesday decision means that Poland's main reference rate remains at 6.75 percent despite the CPI (Consumer Price Index) hitting 17.9 percent year on year in October, the highest level in 25 years. Marcin Bielecki/PAP

Poland's rate setting council said on Wednesday that its decision to put interest rates on hold was based on expectations that the global economic slowdown along with monetary tightening in Poland and abroad will lower inflation towards the central bank's inflation target.

In a statement issued after its decision to keep interest rates level, the Monetary Policy Council (RPP) said that Poland's inflation would remain high in the short term, and the return to the central bank's inflation target would take place gradually.

"The expected weakening of the external economic conditions, along with monetary policy tightening by major central banks, will curb global inflation and commodity prices," the RPP said.

It added that the weakening of the global economic situation will also hamper economic growth in Poland.

"In such conditions, the significant tightening of the (central bank- PAP) NBP's monetary policy to date will be conducive to lowering inflation in Poland towards the NBP's target," the RPP wrote.

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

Poland's next rate decisions will depend on information regarding CPI and growth outlook, as well as on the impact of the Russian invasion of Ukraine, the council said.

The RPP added that the central bank would undertake all necessary measures to maintain macroeconomic and financial stability, in particular, to limit the risk of persistently elevated inflation.

These measures include FX interventions, to be used especially if the zloty moves in the direction opposite to monetary policy goals, the council said.

The RPP predicted that Poland's GDP growth will continue to decline in the coming quarters.

According to the council, the increase in inflation in recent months has resulted from, to a considerable extent, the gradual transfer of high raw material prices to consumer good prices.

The RPP's Wednesday decision means that Poland's main reference rate remains at 6.75 percent despite the CPI (Consumer Price Index) hitting 17.9 percent year on year in October, the highest level in 25 years.