Poland Central Bank Cuts Rates For Third Time

(RTTNews) - Poland's central bank unexpectedly reduced its key interest rate for a third policy session in a row, citing an improvement in the inflation outlook.

The Monetary Policy Council, led by Governor Adam Glapinski, lowered the reference rate by 25 basis points to 4.50 percent, the Narodowy Bank Polski said in a statement on Wednesday. Economists had expected the bank to leave the rate unchanged.

The lombard rate was cut by similar volume to 5.00, percent, the deposit rate to 4.00 percent, rediscount rate to 4.55 percent and the discount rate to 4.60 percent.

"Taking into account an improved inflation outlook for the coming period, in the Council's assessment, it became justified to adjust the level of the NBP interest rates," the central bank said.

The Polish central bank had reduced interest rates by 25 basis points each in July and September.

Headline inflation was steady at 2.9 percent in September, which is within the 2.5 percent +/-1 percentage point target of the central bank. Services inflation and wage growth remains elevated, the bank said, but observed a gradual slowdown in the latter.

Fiscal policy, consumption demand recovery and elevated wage growth remain risk factors for low inflation, the bank said. The level of administered energy prices and inflation developments abroad as well as changes in trade policies of major economies also raise uncertainty, the NBP added.

"The cut in October may add to speculation around a similar move in November, especially as the next November macroeconomic projection is likely to point to inflation running close to the central bank target over the medium term, and below the path outlined in the July projection," ING economist Rafal Benecki said. However, the reference to an improving inflation outlook could imply that this may be the last cut this year, the economist added.