At their Jan 7-8 sitting, members of the Monetary Policy Council (MPC) agreed that interest rates should be kept unchanged at the present meeting, and upheld their view that the current and expected economic situation spoke in favour of keeping interest rates unchanged at least till the middle of 2014, according to the "minutes" of the meeting, published by the National Bank of Poland (NBP). MPC maintained its assessment that the gradual improvement in economic conditions was likely to continue over the coming quarters, while inflation pressure would remain limited. "In this context, the Council confirmed that it would be justified to maintain the interest rates at the current level at least until the end of H1 of 2014," the "minutes" read. The Council first states that interest rates should remain flat until the end of H1 of 2014 in November of 2013 and has then reiterated that view several times. At the same time, Council members recognized at their January sitting that the findings of the March NBP projection would enable a more comprehensive assessment on the horizon of keeping the interest rates at the current level. Indeed, they emphasised that in light of available forecasts the 2014, inflation would stay below the November projection. Nonetheless, in the first two quarters of 2014 the CPI index may increase moderately due to base effects. In December of 2013, consumer inflation was up to 0.7% y/y from 0.6% y/y a month earlier. The central bank's CPI target is 2.5% (+/- 1pp). The average annual inflation was 0.9% in 2013 vs. 3.7% in 2012. In the opinion of some Council members, inflation would stay below the target not only because of low demand pressure, but also due to stabilisation in energy prices. Yet, other Council members pointed to the factors which, in their opinion, could be conducive to higher inflation in the near future. These involve growing demand pressure and a raise in local taxes, as well as higher prices of gas and some services related to the general government sector.
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