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Poland Interest Rate Kept Steady Despite Waning Inflation

World

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The National Bank of Poland kept its benchmark reference rate steady for the sixth meeting at 5.75% in April, as the regulator preserved its cautious approach amid uncertain inflation trajectory.

The Lombard and deposit rate were also held at 6.25% and 5.25%, respectively. The country's inflation slowed sharply to 1.9% in March, remaining within the 1.5%-3.5% target range for the second month.

However, the upside risks to price pressures in the second half of the year persisted since the country's pro-EU ruling coalition restored the value added tax (VAT) rate on basic food products to 5% from 0 as of April 1, lifting a temporary measure put in place in February 2022.

According to projections, this increase will lead to an acceleration in inflation by nearly 1%. Furthermore, the government is yet to decide on its lock on energy prices for households, which remain frozen until the end of June.

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