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Poland Monetary Policy October 2022

Poland: Central Bank stands pat in October

At its 5 October meeting, the National Bank of Poland (NBP) kept the key reference rate unchanged at 6.75%. This followed 11 consecutive meetings in which the NBP hiked rates since it began its tightening cycle in October 2021. The NBP also kept the Lombard rate unchanged at 7.25%, the rediscount rate at 6.80% and the deposit rate at 6.20%.

The NBP decided to stand pat as it deemed that previous rate hikes were already limiting demand growth. That said, inflation climbed further to an over 26-year high of 17.2% in September (August: 16.1%) on increased energy tariffs and higher energy and agricultural costs mainly due to the war in Ukraine. The Central Bank expects the same factors to continue fueling price pressures in the coming quarters. That said, higher interest rates, the fading impact of current shocks and the appreciation of the zloty should then contribute to a gradual decrease in inflation.

In its communiqué, the NBP stated that its decisions will remain driven by data and by the impact of the ongoing war in Ukraine on the Polish economy. Therefore, the Bank avoided giving specific forward-looking guidance.

Commenting on the Bank’s decision, Adam Antoniak and Rafal Benecki, economists at ING, stated:

“The Council rather prefers a longer period of disinflation and soft landing than a prompt return of CPI to 2.5%. Given the fast hikes in developed markets and a tense geopolitical environment, the zloty is at a risk of further weakening.”

The next monetary meeting is scheduled for 9 November.

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