NBP MPC Press Release - 2011-03-02
Central bank: nbp | Type: decision | Date: 2011-03-02

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, 2 March 2011 
 
INFORMATION FROM THE MEETING OF THE MONETARY POLICY 
COUNCIL 
held on 1-2 March 2011 
The Council decided to keep the NBP interest rates unchanged, i.e.: 
 reference rate at 3.75% on an annual basis; 
 lombard rate at 5.25% on an annual basis; 
 deposit rate at 2.25% on an annual basis; 
 rediscount rate at 4.00% on an annual basis. 
 
Incoming data confirm consolidating recovery of the global economy at the turn of 2010 and 2011. 
In 2010 Q4 GDP accelerated slightly in the United St ates and the economic growth in the euro area 
stabilized at a moderate level. Rising external demand and the recovery in domestic demand have 
contributed to maintaining favourable economic conditions in Germany, Poland’s main trading 
partner. Yet, economic growth in the majority of developed countries is still being curbed by high 
unemployment and ongoing adjustments in the ba lance sheets of households, enterprises and 
financial institutions. Major emerging economies and some small open developed economies have 
been tightening monetary policy. The effects of high fiscal imbalance and its planned reduction in 
the developed economies, as well as the effects of monetary expansion, including non-standard 
measures undertaken by major central banks, con tinue to add uncertainty for global economic 
growth outlook. 
Favourable macroeconomic data on major devel oped economies supported an improvement in 
financial market sentiment, yet, in the recent peri od, uncertainty about the political situation in the 
Middle East and Northern Africa has enhanced risk aversion. At the same time it strengthened 
growth of commodity prices in th e global markets. High growth of t hose prices has triggered a rise 
in headline inflation in the global economy, esp ecially in emerging economies. Surging commodity 
prices may also weaken economic activity. 
Data on GDP in Poland confirm that economic growth in 2010 Q4 stabilized at a level close to the 
previous quarter. Continuing relatively high economic growth was supported by a strong increase in 
consumption. The latter was driven by a rise in employment and accelerated growth in wages in the 
economy. It was also strengthened by a surge in advance purchases by households in anticipation of 
VAT rates increases in January 2011. Investment growth, on the other hand, remained low. The 
latest monthly data point to a continuing rapid grow th in industrial output at the beginning of 2011 
as well as to the absence of clear signals of recove ry in investment demand and a decline in retail 
sales growth. At the same time, wage growth in enterprises remained moderate and employment 
growth accelerated, whereas unemployment rate (in seasonally adjusted terms) increased again. A 
further rise in labour force participation is conducive to an increase in unemployment. 
 
 
 
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Lending to enterprises remains limited mainly due to reasons related to de mand for credit. On the 
other hand, a relatively rapid growth in mortgage lending to households has continued (adjusted for 
the impact of foreign exchange rate fluctuations) whereas consumer loans declined. 
In January 2011, CPI inflation rose to 3.8%, i.e. considerably above the NB P's inflation target of 
2.5%. The rise in CPI inflation re sulted largely from the increase in most VAT rates, increases in 
the prices of agricultural commodities and crude oil in the global markets and a rise in administered 
prices. According to preliminary estimates, core infl ation also increased. The rise in inflation was 
accompanied by a pick-up in inflation expectations. 
The Council 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 the March projection – under the assumption of constant NBP interest 
rates – there is a 50-percent proba bility of inflation running in th e range of 2.8-3.7% in 2011 (as 
compared to 2.5-3.5% in the October projection) , 2.2-3.4% in 2012 (as compared to 2.4-3.7%) and 
2.1- 3.7% in 2013. In turn, the March projecti on sees the annual GDP gr owth, with a 50-percent 
probability, in the range of 3.3-5.1% in 2011 (as co mpared to 3.3-5.5% in the October projection), 
2.3-4.8% in 2012 (as compared to 2.8-5.5%) and 1.7-4.4% in 2013. 
In the assessment of the Counc il, continuing economic recovery in Poland, which should support 
employment growth, may gradually increase wage and inflationary pressure s in the medium term. 
At the same time, a considerable increase of current inflation - amidst economic recovery – creates 
a risk that heightened inflation expectations pers ist and may require further tightening of monetary 
policy. Yet, the Council decided that the January in terest rates increase combined with uncertainty 
about the sustainability of acceleration in consumer demand and no signs of considerable recovery 
in investment, as well as sustained moderate wage pressure in the corporat e sector and continuing 
rise in unemployment decrease th e risk of inflation remaining a bove the inflation target in the 
medium term. Therefore, the Council decided to keep the NBP interest rates unchanged. 
An important factor affecting the monetary po licy is the situation of public finances. An 
implementation of 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 the monetary policy transmission mechanism. 
Therefore, the Council expects that measures aimed at curbing the supply of new foreign currency 
loans to households will be introduced. 
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 – March 2011.