For the fourth month running, the National Bank of Poland's rate-setting committee, the Monetary Policy Council (RPP), has cut its reference interest rate by 25 basis points, to 3.75 percent. The last time the main rate was this low was back in March 2011, after which the council raised rates by 25 bp three months in a row.

The RPP was the only rate-setter in Europe to raise interest rates last year, when it did so in May, again by 25 basis points. As economic indicators showed a slowing down of the Polish economy, the council was reluctant to cut rates, but finally began doing so in November of last year. A full percentage point has now been chopped off of Polish borrowing rates since then.

Recent macroeconomic data releases have shown a marked slowdown in inflation – to below the NBP's target of 2.5 percent – as well as in consumption and economic growth in general. Last month, Poland's statistics office GUS announced that in 2012 Poland's economy grew by just 2 percent, its weakest rise since 2009. Private consumption, whose strong performance during 2009-2010 was credited for Poland's ability to escape the global economic crisis without going into recession, has now dipped into negative territory.

Several government officials, including Finance Minister Jacek Rostowski, had called on the council to continue cutting rates. While a cut had been widely favored by economists, there was some doubt as to whether the council would come through, after NBP president and head of the RPP, Marek Belka, said in January that the council's easing cycle was “nearing an end.”

Andrew Kureth