The reference rate was kept at 5.75 per cent; the lombard rate at 6.25 per cent; the deposit rate at 5.25 per cent; the rediscount rate at 5.80 per cent; and the discount rate at 5.85 per cent.

The process of disinflation continues in the Polish economy, a press release by the bank noted.

In Poland, incoming data signal that though annual economic activity growth increased in the fourth quarter last year, it remained relatively low.

Following an earlier increase in October 2023, retail sales and industrial output in November 2023 were lower than a year before. At the same time, construction and assembly production continues to grow.

Despite the weakened activity growth, the labour market situation remains good and unemployment is low, the central bank noted. Although the number of working persons continues to be high, employment in the enterprise sector was lower in November 2023 than at the beginning of 2023.

According to the Statistics Poland flash estimate, annual consumer price index (CPI)-based inflation in December last year declined to 6.1 per cent from 6.6 per cent in November.

The decrease in inflation in annual terms was thought to be driven by a fall in annual price growth of food and non-alcoholic beverages, as well as core inflation.

However, an increase in annual price growth of energy had the opposite effect on annual inflation. In November 2023, producer prices were again considerably lower than a year ago, which confirms the fading of most external supply shocks and a reduction of cost pressures. Together with the relatively low economic activity growth, it is conducive to a decline in inflation.

The monetary policy council assesses that despite the observed economic recovery, demand and cost pressures in the Polish economy remain low, which amidst weakened economic conditions and falling inflation pressure abroad will support a gradual decline in domestic inflation.

In the coming months, annual CPI growth is likely to fall significantly, while the decline in core inflation will be slower. At the same time, inflation developments in subsequent quarters are associated with uncertainty, related in particular to the impact of fiscal and regulatory policies on price developments, as well as the pace of economic recovery in Poland.

Fibre2Fashion News Desk (DS)