Poland's Monetary Policy Council cuts all interest rates

Wednesday's cut brings Poland's interest rates to their lowest levels on record. Wojciech Pacecwicz/PAP

Poland's Monetary Policy Council (RPP) cut all the country's interest rates on Wednesday by 50 bps, with the reference rate set at 0.50 bps, RPP said in a statement.

Wednesday's cut brings Poland's interest rates to their lowest levels on record.

The National Bank of Poland's lombard rate has been cut from 1.50 percent to 1.00 percent. The deposit rate has been reduced to 0.00 percent from 0.50 percent and the rediscount rate was cut from 1.05 percent to 0.55 percent.

Previously the RPP changed Poland's interest rates in on March 17, cutting most of them by 50 bps.

RPP will publish a report from its Wednesday sitting at 4 pm. No standard press conference will be held this time.

The Council in its report on sitting wrote that economic conditions in Poland in the first months of the year were relatively favourable. However, measures aimed at limiting the spread of epidemic contribute to the reduction of economic activity. In the short run, the scale of activity drop could be very sizable. This will be accompanied by a deteriorating situation in the labour market and a fall of disposable income of households.

Further ahead, economic activity should, however, gradually recover, supported by fiscal measures introduced in Poland and many other countries as well as strong macroeconomic fundamentals of the Polish economy related to its low internal and external indebtedness and high competitiveness together with geographical and sectoral diversification of Polish exports.

Expected global economic downturn together with lower commodity prices and weaker domestic demand will contribute to a marked deceleration of price growth. Consequently, despite recent monetary policy easing introduced by NBP, the risk of inflation falling below the NBP inflation target in the monetary policy transmission horizon prevails.

Considering the above-mentioned circumstances, the Council decided to ease monetary conditions. Thus, the Council cut the NBP interest rates further.

The Council wrote that the NBP will continue, apart from basic operations, to provide liquidity to the banking sector using repo transactions. NBP will purchase government securities and government guaranteed debt securities on the secondary market as part of the structural operations.

Furthermore NBP will offer bill discount credit aimed at refinancing loans granted to enterprises by banks.

The measures undertaken by NBP are aimed at easing financing conditions in the economy and mitigating the negative economic impact of pandemic, thus being conducive to maintaining macroeconomic and financial stability. Those measures will also contribute to recovery in domestic economic activity after the abatement of current disturbances.

Consequently, they will reduce the risk of inflation falling below the NBP inflation target in the medium term.