Poland cuts interest rates for fourth time as economy further slows down
February 7, 2013
Central bank head Marek Belka
Poland's Monetary Policy Council offered its fourth consecutive 25 bps cut to official interest rates, as macro data for December proved worse than already-depressed forecasts and domestic consumption declined more than at any time in the past ten years.
Industrial output fell by 10.6% year on year and retail sales defied forecasts for growth, falling 2.5% y/y.
Prices also proved mild: Producer prices showed the second straight month of deflation. Consumer inflation slipped to 2.4%, a notch below the NBP central target and the lowest reading since August 2010. Wage growth proved slower and jobs fewer.
Poland's GDP grew an estimated 2.0% year-on-year in 2012, marginally below expectations for 2.1%, while investments grew by 0.6% and domestic demand rose by 0.1%, according to the preliminary estimates of the Central Statistical Office (GUS).
Poland's Monetary Policy Council is concerned about the deep decline in consumption visible in Q4, but sees no abrupt deterioration of the economic conditions in Q4, the NBP central bank President Marek Belka told a press conference.
"Naturally, the council is worried about the domestic consumption decline [in Q4], the drop was deeper than at any time in the past years," Belka said, commenting on 2012 preliminary GDP growth data. "But we observed no abrupt deterioration of the economic development in Q4," he added.
The February cut puts the reference rate down to 3.75%, still 25 bps above the post-crisis low which reigned from mid-2009 to early 2011.
In its statement after February sitting, the council removed its informal easing bias and replaced it with a phrase that further decisions will depend on inflowing information, including the next projection, due in March.
Belka said that the change in statement did not mean shift in bias.
“Poland's rate council had no intention of suggesting a shift to its easing bias, as all options except for a rate hike are open for the March sitting, Belka told a news conference following February policy sitting.
A change in bias would suggest that hikes are as likely as cuts and "there is no such situation at the moment," Belka said.