Narodowy Bank Polski

Information on the meeting of the Monetary Policy Council on December 17-18, 2002


The Monetary Policy Council held its meeting on December 17-18, 2002. The Council was submitted the materials prepared by the Management Board and departments of the NBP as well as information and analytical materials prepared by the Ministry of Finance, banks and research institutes. The Council discussed the external conditions of the Polish economy and tendencies in the real sector of the economy, in the area of wages and social benefits, in public finance sector, in the area of money supply, lending and interest rates, and the formation of inflation expectations, prices and the inflation outlook.

Decision of the Monetary Policy Council

Within the period that passed since last meeting of the Monetary Policy Council there appeared a few data illustrating the development of the economic situation. In November, the 12-month inflation lowered to the level 0.9% from 1.1% in October. The price level in November as compared to October lowered by 0.1% what was mainly affected by the drop of foodstuffs and non-alcoholic beverages prices and the drop of alcoholic beverages prices. It should be emphasized that the mid-year inflation in Poland in October this year calculated according to the methodology used in the European Union (HICP) can be estimated at 2.4% (as compared to 2.0% in the EU).

Good results of the Polish foreign trade got confirmed, but as compared to the previous year the turnover dynamics is slower. The latest survey about the economic situation by GUS indicates the climate improvement in processing industry. These data complement the estimate made a month before about a gradual improvement of the economic activity. After the decisions made at the summit in Copenhagen, finishing Poland´s negotiations about the European Union accession, it should be expected that integration processes within the EU would support a further economic boom.

In November 2002, in the economy there were still observed the phenomena that support the enhancement of a low level of inflation:
  • inflation expectations of individuals and bank analysts are maintained at a low level,
  • a low annualized dynamics of total money supply is maintained, the cash dynamics stabilized, and the annualized lending dynamics is still at a low level,
  • a moderate wage increase does not threaten in a form of the inflation pressure growth.
Considering that the effects of the interest rate cuts made so far have not been revealed yet, it is necessary to preserve caution in monetary policy. Moreover, the importance of factors that can impede the stabilization of inflation at a low level has not diminished yet:
  • there is a threat in a form of a bigger economic deficit of public finance sector than it was planned in the draft act on the state budget for the year 2003,
  • there is still observed a drop of deposits placed by households at banks,
  • as a result of a persistent threat of an armed conflict with Iraq and the prolonging strike in Venezuela, oil on the world markets, after price drops in October, gets more expensive again,
  • together with the improvement of the economic growth dynamics, the inflation pressure can appear.
Considering the above mentioned conditions, the Monetary Policy Council decided to maintain the basic interest rates of the NBP at the present level and maintain its neutral position in monetary policy.

The work on a medium-term strategy of monetary policy has been continued. Moreover, the Council discussed the balance of payments for 3 quarters of 2002. The Council has also adopted a resolution on principles of conducting open market operations shortening the time frame of basic operations from 28 to 14 days.

The next meeting of the Monetary Policy Council will be held on January 28-29, 2003.

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