Polish NPB keeps interest rates unchanged; activity growth slows down

Industrial, construction and assembly output as well as retail sales decreased in annual terms in May this year.

The Narodowy Bank Polski (NBP) reference rate remained at 6.75 per cent, lombard rate at 7.25 per cent, deposit rate at 6.25 per cent, rediscount rate at 6.8 per cent and discount rate at 6.85 per cent.

Despite the slowdown in activity growth, the labour market situation remains good and unemployment is low, said an NBP release.

The number of working persons continues to be high, although this is accompanied by the low annual growth in employment in the enterprise sector.

According to Statistics Poland flash estimate, annual consumer price index (CPI)-based inflation declined again, falling to a level of 11.5 per cent year on year (YoY) in June this year compared to 13 per cent YoY in May. At the same time, the overall price level did not change for the second consecutive month.

The decrease in inflation in annual terms was driven mainly by a fall in annual price growth of energy.

Available data shows core inflation decreased again in June as well. At the same time, the producer price growth is still decreasing strongly.

Together with the lower economic activity growth, it will support a further decline in consumer price inflation in the coming quarters, the central bank noted.

There is a 50 per cent probability that the annual price growth will be in the range of 11.1-12.7 per cent this year against 10.2-13.5 per cent projected in March, 3.7-6.8 per cent in 2024 compared to 3.9-7.5 per cent projected in March; and 2.1-5.1 per cent in 2025 compared to 2-5 per cent projected in March.

At the same time, the annual gross domestic product growth, according to this projection, will be with a 50-per cent probability in the range of minus 0.2-1.3 per cent this year, 1.4-3.3 per cent in 2024 and 2.1-4.4 per cent in 2025.

The central bank assesses that the weakening of the external economic conditions, together with a decline in commodity prices, will continue to curb global inflation, which will still contribute to lower price growth in Poland.

The decline in domestic inflation will be supported by a weakening of GDP growth, including consumption, amid a significant decrease in credit growth, it added.

Fibre2Fashion News Desk (DS)