Narodowy Bank Polski

Information on the meeting of the Monetary Policy Council on October 22-23, 2002


The Monetary Policy Council held a meeting on 22nd and 23rd October 2002. The Council reviewed the materials prepared by the NBP Management Board and departments as well as information and analytical materials of the Ministry of Finance, banks and research institutes. The Council discussed the situation in the external environment of Polish economy and trends in the real economy, the scope of employee earnings and social benefits, within the public sector finance, within the money supply, credit and interest rates and also the development of inflation and price expectations as well as inflation prospects.

The Monetary Policy Council decision

A low inflation level is seen to establish in October. Factors containing the inflation growth in the future continue:
  • the current inflation rate and core inflation measures stabilised on a low level,
  • threats to the future inflation from monetary factors remained low: annual growth rate of total money supply has clearly declined, likewise the annual growth rates of notes and coin in circulation; the pace of credits growth is also slow,
  • inflation expectations improved, both of consumer and of bank analysts,
  • a moderate increase in employee earnings - at a high unemployment level - does not threat with an inflation pressure,
  • forecasts for global economy growth, of which in particular for German economy, indicate that a slower economic recovery shall be expected.
The picture of macroeconomic situation is not clear. A part of data, primarily on September industrial output and retail sales, indicates that a gradual economic recovery should occur. However, the figures on enterprises´ investment activity and financial standing after three quarters are not available yet. Under such circumstances it is difficult to make a definite assessment of the scale and durability of recovery in enterprises and of prospects for economic growth acceleration in the following quarters.

Factors that might endanger the inflation stabilisation on a low level and constrain the growth of manufacturing potential have been continuing:
  • uncertainty in respect of outcomes of the National Budget this year and - indirectly - next year remains,
  • high oil prices in global markets as well as the risk of their increase continue,
  • the decline in households deposits at banks became deeper in September,
  • despite a very slow pace of monetary aggregates growth it is very difficult to evaluate what will be the deferred response to already taken decisions on cutting interest rates, which as compared to 2001 are on a drastically lower level.
The Monetary Policy Council considered that from the future inflation point of view the inflation pressure constraining factors continue - in the light of current forecasts - to have greater impact than factors threatening the inflation stabilisation and resolved:
  • to reduce the lombard rate from 10.0% to 9.0% per annum;
  • to reduce the rate on bills rediscounting from 8.5% to 7.75% p.a.;
  • the National Bank of Poland is going to run 28-day open market operations at the yield not lower than 7.0% p.a.;
  • the interest rate on time deposits taken from the banks by the NBP stands at 5.0% p.a.;
The Council continues to hold a neutral stance in the monetary policy.

The Monetary Policy Council has discussed preliminary assumptions of the medium-term monetary policy strategy for the years 2004 - 2006. The MPC has emphasised that it is necessary to prepare this document within the nearest few months to ensure transparency of the monetary policy as - having regard to delays in the economy responses to decisions on NBP interest rates - it will provide the basis for the monetary policy in 2003 and will affect the monetary situation in the following years. The medium-term monetary policy strategy will be based on the assumptions of integration with the Economic and Monetary Union agreed with the government, which stipulate that in 2005 Poland shall meet the nominal Maastricht convergence criteria, including the inflation criterion.

The next meeting of the Monetary Policy Council is to be held on 26-27 November 2002.

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Lombard rate 7.25
Deposit rate 6.25
Rediscount rate 6.80
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