Poland's Monetary Council cuts basic reference interest rate

2020-03-17 18:33 update: 2020-03-19, 09:21
President of Monetary Policy Council (RPP), Adam Glapiński. Photo PAP/Tomasz Gzell
President of Monetary Policy Council (RPP), Adam Glapiński. Photo PAP/Tomasz Gzell
Poland's Monetary Policy Council (RPP) on Tuesday cut - for the first time in five years -the country's basic reference interest rate by 50 bps to 1.0 percent, which is the lowest level in history, the RPP reported on the central bank's website.

The National Bank of Poland's lombard rate has been cut from 2.50 percent to 1.50 percent. The deposit rate has been left at 0.50 percent and the rediscount rate was cut from 1.75 percent to 1.05 percent.

Previously the RPP changed Poland's interest rates in March 2015, having cut them by 50 bps. 

According to the RPP, all measures, the implementation of which were announced by the National Bank of Poland's board, namely, providing liquidity to the banking sector using repo transactions, purchasing government bonds on the secondary market as part of the structural operations that change the long-term liquidity structure in the banking sector, and contributing to the maintaining of the liquidity in the government bond secondary market. Furthermore NBP will offer bill discount credit aimed at refinancing new loans granted to economic entities by banks.

In the RPP's assessment, all the above-mentioned measures will mitigate the negative economic impact of the coronavirus spread, while further ahead they will contribute to recovery in domestic economic activity and will be conducive to inflation running at the level of the NBP inflation target in the medium term, the RPP wrote in a communique published on the NBP's website.

"(...) latest forecasts indicate a higher probability of inflation decreasing more quickly in 2020 than anticipated in the March projection and of inflation falling below the NBP inflation target in the monetary policy transmission horizon. In these circumstance, the RPP decided to cut the NBP interest rates," reads the communique. (PAP)