Poland raises interest rates amid high inflation

WARSAW, Poland (AP) — Poland's central bank raised its key interest rate a quarter of a percentage point to 4.75 percent on Wednesday, indicating that it is more concerned about persistently high inflation than a risk of a serious economic slowdown.

The decision by the National Bank of Poland was the first rate hike in Poland in 10 months and something as a surprise to the markets. Some economists predict there won't be any more hikes this year given the generally week global economic climate.

The bank said raising the reference rate from 4.5 to 4.75 percent was made to help contain the risk of inflation, which was at an annual rate of 3.9 percent in March — an improvement over previous months but still significantly above the bank's target of 2.5 percent.

In a statement, the monetary policy council made clear that it is less concerned about an economic slowdown at this point. It noted that economic growth in the first quarter "probably remained relatively high, although it has slowed down somewhat."

GDP grew by 4.3 percent last year and is expected to grow around 2.5 percent this year. First quarter data are to be released later this month, but the bank said a business survey it did shows signs of a continued strong growth in retail sales and a good situation for enterprises.

It said there are "signals that economic slowdown in subsequent quarters could be limited," though it also expects weaker industrial and construction output.

Poland was the only European Union member to avoid recession during 2008-2009 thanks to strong consumer demand, EU subsidies and a large number of construction projects aimed at preparing the country to co-host the European football championship this summer. Officials often express hope that the country, which has its own currency, will continue to see healthy growth despite its many trade links with the eurozone.