Poland: Central Bank leaves rates unchanged in February
Latest bank decision: On 4–5 February, the National Bank of Poland (NBP) kept interest rates unchanged, with the reference rate remaining at 5.75%. The Bank stood pat for the 16th consecutive month, matching market expectations.
Monetary policy drivers: The Bank’s decision was influenced by above-target inflation, which reached 4.7% in December, mainly due to increases in the administered prices of energy bills. Additionally, wage growth remains high, particularly in the public sector. The Bank also assessed that headline inflation will remain “markedly above the NBP target” of 1.5–3.5% in the coming quarters, with the removal out of energy price caps in H2 potentially keeping price pressures higher for longer. This prompted the Bank’s continued hawkish stance.
Policy outlook: The NBP reemphasized its mandate to bring inflation back to target and mentioned the possibility of intervening in the foreign exchange market. Meanwhile, recent statements by NBP council members suggest rate cuts could start in H2 2025, in line with our Consensus. All but one of our panelists expect the Bank to stand pat throughout Q1, and the majority foresee the first rate cuts in Q3. The reference rate should end 2025 about 100 basis points below its current level. A potentially weaker zloty and higher-than-expected price pressures pose upside risks to the policy rate.
The NBP will reconvene on 11–12 March.
Panelist insight: ING’s Rafal Benecki and Leszek Kasek commented:
“We expect the domestic and foreign context to allow for a discussion of rate cuts in mid-year. We still assume a 50-100bp cut in 2025. Our inflation forecasts for fourth quarter 2025, when the energy shields will be lifted, are significantly lower than those presented by the NBP governor at the previous meeting. In addition, the delivered inflation in 4Q24, stronger PLN, as well as possible trade wars – through oversupply in Europe as a result of reduced exports from China and Europe to the US – mean that the chances of a lower inflation trajectory in 2025 are increasing.”
EIU analysts largely echoed this view:
“With inflation set to average above 5% in the first half of 2025 before slowly trending downwards to close to 3% by the end of the year, we expect the NBP to keep rates on hold until the third quarter. We forecast 75 basis points of cuts to the policy rate in the second half of 2025 […]. With the economic recovery spluttering in the third quarter of 2024 and other indicators pointing to a slow pick-up in late 2024 and early 2025, the NBP is in a position to lower rates sooner.”