Polish Central Bank Cuts Borrowing Costs, Zloty Rises against Euro

The Central Bank of Poland has decided to cut the borrowing costs for the 2nd month on a row in an attempt to spur the economic growth in the country. Incidentally, Poland is the biggest eastern economy in the European Union and for the 1st time in the last 2 decades, it is facing the risk of getting under recession. The Central Bank of Poland is the only Central Bank in the 27-nation European Union that has decided to lower the benchmark. The 7-day reference rate is down by 25 basis points now and is at 4.25%.

Incidentally, in November, the Narodowy Bank Polski released a statement to announce their decision of the cutting the rate for the very 1st time since 2009. However, the Governor, Marek Belka stated that Poland is under no threat of recession. He also commented that the decision of cutting rates was taken to start a monetary easing cycle. However, things are definitely not going smooth for Poland for the time being and the inflation has slowed down below the tolerance range. The economic growth was also the lowest in the last 13 quarters. 

Zloty, the major currency of Poland strengthened against Euro by 0.3% and is currently at 4.1196 per Euro. In 2012, Zloty has gained around 8.4% against Euro and this is the best performance of a currency against Euro in 2012, after Hungarian Forint. The yield on 5-year Polish Government bonds also surged by 2 basis points and is at 3.6% currently.

In September, the inflation was at 3.8%; however, it went down to 3.4% in October. According to an economist of Societe Generale, Jaroslaw Janecki, in November, the inflation rate will see a sharp decline. The expected rate is somewhere around 2.8% and the rate will be confirmed by The Central Statistical Office on 13th December.

The Central Bank has predicted that the consumer price growth will decelerate to 2.5% in 2013. The economy is expected to expand by 1.5% in 2013 and this will mark the lowest growth for this country since 2002. The economic growth of Poland in this year’s 3rd quarter has slowed down and the domestic demand is also on a 2nd straight year decline. The consumer spending has only increased by 0.1% and this is the lowest figure since 2003.