Central Bank stands pat again in April

At its 3–4 April meeting, the National Bank of Poland (NBP) extended the pause on its monetary loosening cycle, keeping its reference rate at 5.75%, as had been expected by markets. The NBP also left all of its other rates unchanged, with the Lombard rate remaining at 6.25%, the discount rate at 5.85%, the rediscount rate at 5.80% and the deposit rate at 5.25%.

The NBP decided to stand pat as, even though the disinflationary process continued, significant upside risks to the inflation outlook persisted. In March, inflation eased to 1.9% (February: 2.8%)—the lowest rate since March 2019. Moreover, in February, producer prices fell year on year for the eighth month running. The Bank expects inflation to remain within its 1.5-3.5% target band in the coming months. However, the evolution of inflation in H2 is surrounded by significant uncertainty relating to the impact of the government’s fiscal and regulatory policies on GDP growth, wage increases and, therefore, price pressures.

In its communiqué, the NBP reiterated it is ready to “take all necessary actions in order to ensure macroeconomic and financial stability,” including intervention in the foreign exchange market; the Bank will base upcoming decisions on inflation and economic activity data. Our panelists expect the NBP to cut interest rates this year amid receding inflation. The next monetary policy decision will be taken on 8–9 May.

Commenting on the future path of monetary policy, ING’s Adam Antoniak and Rafal Benecki stated: “We forecast that the NBP will keep rates unchanged through to the end of 2024. The debate on monetary easing may start in the fourth quarter of this year if the upswing in inflation turns out lower than feared and the medium-term outlook improves. In 2025, we expect to see 75-100bp of rate cuts from the central bank.”

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