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Poland Monetary Policy July 2023

Poland: Central Bank maintains pause in July

At its 5–6 July meeting, the National Bank of Poland (NBP) left the key reference rate unchanged at 6.75% once again, following June’s hold. The NBP also kept the Lombard rate at 7.25%, the discount rate at 6.85%, the rediscount rate at 6.80% and the deposit rate at 6.25%. July’s decision fell in line with market expectations.

The NBP stood pat again in July due to moderating inflation and softening economic growth. On the price front, lower commodity prices, easing supply chain disruptions, weaker domestic activity and previous interest rate increases continued to support a disinflationary trend: Inflation fell to 11.5% in June (May: 13.0%). This prompted the Bank to revise its previous inflation forecast range for 2023 to 11.1–12.7%—previously estimated at 10.2–13.5% in March. Meanwhile, the NBP stressed that economic conditions have deteriorated globally and domestically, with annual output in retail sales, manufacturing and construction declining in May. In turn, the Bank lowered its 2023 GDP growth forecast range to -0.2–1.3%, from -0.1–1.8% in March, further supporting the rate hold.

In its communiqué, the NBP reiterated its commitment to take upcoming decisions on the basis of incoming data on inflation and economic activity, while remaining ready to “take all necessary actions in order to ensure macroeconomic and financial stability,” including through foreign exchange market interventions. Going forward, the majority of our panel anticipates interest rates ending the year at current levels. That said, Central Bank Governor Glapinski signaled in the NBP’s press conference that rate cuts could begin in September if inflation were to fall within single digits by then.

The next monetary policy decision will be taken on 5–6 September.

Rafal Benecki and Leszek Kasek, economists at ING, foresee rate cuts ahead this year:

“The MPC is strongly focused on the second half of 2023 and 2024 – a period when the inflation situation looks better compared with the March projection, so we maintain our view that rate cuts are possible after the holidays, i.e. in September and October. […] In the longer term, we do not see a convincing weakening of inflationary pressures.”

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