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Poland Cuts Key Rate Further On Outlook For Sizable Economic Slump On Covid-19

Poland's central bank cut its key interest rate for a second policy session in a row as policymakers expect economic activity to fall drastically in the short run due to the containment measures adopted to slow the spread of the coronavirus, or Covid-19, pandemic.

The Monetary Policy Council decided to cut the key reference rate by 50 basis points to a fresh record low 0.50 percent, the National Bank of Poland said in a statement on Wednesday. The bank had slashed the rate by 50 basis points in an emergency meeting on March 17.

The lombard rate was lowered to 1 percent from 1.50 percent, while the deposit rate was cut to zero. The rediscount rate was slashed to 0.55 percent from 1.05 percent.

"In the short run, the scale of activity drop could be very sizable," the NBP said. "This will be accompanied by a deteriorating situation in the labour market and a fall of disposable income of households."

Policymakers expect the economic activity to gradually recover further ahead, supported by fiscal measures introduced in the country and many other countries as well as strong macroeconomic fundamentals of the Polish economy.

They expect inflation to fall below the target due to a global slowdown and, lower commodity prices and weaker demand.

The central bank also said it will continue to provide liquidity to the banking sector using repo transactions and will purchase government securities and government guaranteed debt securities on the secondary market as part of the structural operations.

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