Poland’s central bank policymakers expect the economy to experience continued stable growth and suggested that the momentum may have picked up in the first quarter from the previous three months, the minutes of the National Bank of Poland’s April 15 rate-setting session showed Thursday.
Rate-setters assessed that growth continued to be fueled by sustained growth in domestic demand, the minutes said. They expressed concern over the sluggish foreign demand hurting GDP growth in the first quarter.
On April 15, the Monetary Policy Council, led by Governor Marek Belka, left the reference unchanged at a record low 1.50 percent, after cutting it by 50 basis points in March.
Voting results, also published on Thursday, revealed that the March rate cut was decided on a 6-4 vote. In March, the bank had hinted that the rate cut could be a final dose of support for the economy amid lingering deflation.
Most members of the Monetary Policy Council assessed that GDP growth in the coming quarters would gradually accelerate with consumption and investment remaining its key drivers, the minutes said. Some members expect GDP growth to be better than anticipated in the March projection given the faster improvement in the labor market.
They also expect the apparent recovery in the euro area to benefit Poland’s exports. However, policymakers pointed out the appreciation of the exchange rate of the zloty in the past quarter, driven by the European Central Bank’s quantitative easing.
“Some Council members observed that the appreciation of the zloty might constrain the competitiveness of Polish exports,” the minutes said.
Inflation was assessed to remain negative in the coming quarters, mainly due to the prior sharp price declines in commodity markets. Once the effects of those shocks waned, price growth is expected to gradually increase.
“This would be additionally supported by both the sustained economic recovery at home and an improvement in economic conditions abroad, which – together with the prior adjustment of monetary policy – would limit the risk of inflation continuing below the target in the medium term,” the minutes said.
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