NBP MPC Press Release - 2010-10-27
Central bank: nbp | Type: decision | Date: 2010-10-27

National Bank of Poland 
 
Monetary Policy Council 
 
ul. Świ ętokrzyska 11/21, 00-919 Warszawa, Poland, phone (48 22) 826 99 55, fax (48 22) 826 37 51, 
 
 
Warsaw, 27 October 2010 
 
INFORMATION FROM THE MEETING OF THE MONETARY POLICY 
COUNCIL 
held on 26-27 October 2010 
The Council decided to keep the NBP interest rates unchanged: 
 reference rate at 3.50% on an annual basis; 
 lombard rate at 5.00% on an annual basis; 
 deposit rate at 2.00% on an annual basis; 
 rediscount rate at 3.75% on an annual basis; 
 discount rate at 4.00% on an annual basis. 
At the same time, the Council decided to increas e the required reserve ra te by 0.5 percentage 
points from 3.0% to 3.5%. This decision a pplies to the required reserve to be maintained 
from 31 December 2010. 
 
Modest recovery in the global eco nomy has continued, and its pace in the second half of 2010 is 
likely to be lower than in the fi rst half of the year. Economic grow th in the develo ped countries is 
curbed by high unemployment and ongoing adjustme nts in the balance sheets of households, 
enterprises and financial institutions. The rapid gr owth in the major emerging economies has been 
decelerating slightly, which is driven by tighten ing of the economic policy in some of those 
countries aimed at limiting the risk of growing macroeconomic imbalance. The effects of high fiscal 
imbalance and its planned reduction in the develope d economies, as well as the effects of monetary 
expansion, including non-standard measures unde rtaken and envisaged by major central banks 
continue to be an important uncertainty factor for the global economic growth. 
In the recent period expectations of increased scale of monetary expansion in the United States were 
accompanied by improved investors’ sentiment in the financial markets. Both factors, on the one 
hand, supported the appreciation of currencies against the US dollar, including that of the zloty as 
well as of currencies of other emerging economies. On the other hand, they were also conducive to 
a rise in prices of some commodities in the world markets. 
The data on the Polish economy in 2010 Q3 signal sl ightly higher economic growth as compared to 
the previous quarter. Industrial outp ut continues to grow rapidly. In the recent period the growth of 
construction and assembly output accelerated. Pr oduction capacity utilization has been steadily 
rising. Enterprises continue to have very good fina ncial and liquidity situa tion. At the same time, 
despite improvement in current activity, in the major ity of sectors expectations of enterprises about 
demand and output have deteriorated. Enterprise s continue to increase employment, albeit the 
decline in the registered unemployment rate has halted (in seasonally adju sted terms). Rise in 
employment is supported by continued high wage discipline in enterprises. In 2010 Q3 wage 
growth declined in the corporate sector. Growin g number of economically active persons may have 
a dampening effect on wage growth. 
 
 
 
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Lending to enterprises remains limited, mainly due to reasons related to the demand for credit. 
Stable growth in mortgage loans to households continues. The share of foreign currency loans in the 
newly granted mortgage loans to households is on the rise again. 
In September 2010 the annual CPI inflation increased to the level of the NBP in flation target set at 
2.5%. This rise in CPI inflation was mainly driven by an increase in the growth of food prices and – 
to a lesser degree – of energy prices. Core inflati on net of food and energy has not changed. At the 
same time, other core inflation measures and PPI growth increased. The majority of inflation 
expectation measures are close to the NBP inflation target. In the coming months a further rise in 
CPI inflation may be expected, which shall be driven by growing food and energy prices. Moreover, 
in 2011 the level of prices may be slightly increased by the announced change in VAT rates. 
The Council has got acquainted with the projection of inflation and GDP prepared by the Economic 
Institute of the NBP, which is one of the inputs into the Council’s decision-making on the NBP 
interest rates. In line with th e October projection – unde r the assumption of constant NBP interest 
rates – there is a 50-percent proba bility of inflation running in th e range of 2.4-2.6% in 2010 (as 
compared to 2.3-2.9% in the June projection), 2.5-3.5% in 2011 (as compared to 2.1-3.3%) and 2.4-
3.7% in 2012 (as compared to 2.2-3.7%). In turn, the October projec tion sees the annual GDP 
growth with a 50-percent probability in the range of 3.3-3.7% in 2010 (as compared to 2.5-3.9% in 
the June projection), 3.3-5.5% in 2011 (as comp ared to 3.3-5.9%) and 2.8-5.5% in 2012 (as 
compared to 2.2-5.0%). 
In the Council’s assessment, the currently limited inflationary and wage pressure in the Polish 
economy and – not accounted for in the baseline scenario of the October inflation and GDP 
projection – the possibility of growing capital in flows to the emerging economies, including to 
Poland, amidst the extended period of expansi onary monetary policy of major central banks, 
combined with the risk of further weakening of the global economic growth justify keeping the 
NBP interest rates unchanged. 
At the same time, the Council will continue to an alyse the signs of possibl e rise in inflationary 
pressure. 
The Council decided to increase the required reserv e rate by 0.5 percentage points from 3.0% to 
3.5%. This decision applies to the required reserv e to be maintained from 31 December 2010. As a 
result of this decision the required reserve rate will return to the level effective before 30 June 2009. 
An important factor affecting the monetary polic y is the situation of pub lic finance. Introducing 
decisive measures aimed at permanently reducing the deficit of the general government sector and 
at curbing the increase of the public debt is necessary for macroeconomic stability and will allow 
the meeting of euro adoption criteria. 
In the opinion of the Council, introducing measures aimed at preventing fast growth in foreign 
currency lending to households is important for macroeconomic stab ility. Such measures can also 
contribute to increasing the effectiveness of monetary policy transmission mechanism. 
The Council maintains its view that Poland should jo in the ERM II and the euro area at the earliest 
possible date, after meeting the necessary legal, economic and organisational conditions. 
The Council has adopted the Inflation Report – October 2010 , the Balance of Payments of the 
Republic of Poland for 2010 Q2 and the Opinion of the Monetary Policy Council on the Draft 
Budget Act for 2011.