Zloty Remains Strong Even as Poland’s Central Bank Cuts Rates

  December 05th, 2012 at 18:18, Vladimir Vyun

Multiple zloty banknotesThe Polish zloty managed to appreciate today even after Poland’s central bank slashed its key reference rate amid the economic slowdown and hinted that further rate cuts are possible.

The National Bank of Poland cut its main interest rate by 25 basis points to 4.25 percent today. The bank explained the decision by negative developments in both world and domestic economies. Regarding the global fundamentals the central bank said:

Incoming data show that global economic activity continues to be weak. Although economic growth in the United States accelerated in 2012 Q3, recession in the euro area persisted. At the same time, economic activity in the largest emerging economies was relatively low.

As for the domestic economic environment, the NBP noted:

A marked economic slowdown in Poland was confirmed by the data on GDP in Q3. A decline in domestic demand deepened, which was driven by decreasing investment and decelerating consumption growth.

That was the second interest rate cut in a row. Moreover, the bank hinted that further monetary easing is possible:

Should the incoming information confirm a protracted economic slowdown, and should the risk of increase in inflationary pressure remain limited, the Council will further ease monetary policy.

It is really surprising that the zloty managed to stay firm after such dovish comments.

USD/PLN fell from 3.1563 to 3.1481 and EUR/PLN dropped from 4.1329 to 4.1188 as of 18:18 GMT today.

If you have any questions, comments or opinions regarding the Polish Zloty, feel free to post them using the commentary form below.

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