On Tuesday, Poland’s Central Bank signalled it would have preferred the national currency, the zloty, to be weaker during the coronavirus pandemic to support economic recovery, economists said.
TheMonetary Policy Council (MPC), which has cut rates three times this year by a cumulative 140 basis points to 0.1% to tackle the economic slowdown, said that its actions would limit the risk of inflation falling below its target of 2.5%.
Government forecasters had expected the Polish economy to contract by up to 10% in the second quarter, while the Organisation for Economic Co-operation and Development (OECD) predicted Poland’s economy will shrink by 7.4-9.5% this year.
The National Bank of Poland said it expected that in the near term “further recovery” of economic activity may be expected. However it was concerned that it may be limited by lower wages and uncertainty about the pandemic’s consequences.
“The pace of the economic recovery could also be mitigated by the lack of visible zloty exchange rate adjustment to the global pandemic shock and to the monetary policy easing introduced by NBP,” a central bank statement said.