The National Bank of Poland (NBP) left its reference interest rate unchanged at 6.75% for a fifth consecutive meeting on February 8 (chart).
The decision is hardly a surprise and markets have long pencilled it in. The NBP’s shifted its focus from containing inflation to preserving conditions for economic growth – which is not expected at more than 1% in 2023 – after aggressive tightening that took place between October 2021 and September last year set the context for price growth to begin easing gradually.
Poland’s CPI growth remained elevated at 16.6% y/y in December but still came in at 0.9pp lower than in the preceding month. Other indicators, such as the PPI, also point to easing inflation, even though the process is very slow.
An expected rebound of the inflation rate in January and – possibly – in February is expected to be short-lived.
“The expected weakening of the external economic conditions, together with monetary policy tightening by major central banks, will curb global inflation and commodity prices,” the NBP said in a statement unchanged from the previous meeting.
“The deterioration of the global economic conditions also hampers GDP growth in Poland. Under such circumstances, the hitherto significant monetary policy tightening by NBP will support a decline in inflation in Poland towards the NBP inflation target,” the central bank added.
Analysts say that the NBP will announce an official end to the tightening cycle at its March meeting when it will present new inflation and GDP growth projections.
But any talk about monetary easing seems a bit “premature at this stage given the current strength of inflation pressures,” Capital Economics said in a comment.
Later in the year, however, a rate cut appears likely, the London-based consultancy speculates.
“We think a sharp fall in inflation later this year will provide the NBP with scope to start cutting rates. We expect a 25bp cut to 6.50% by year-end, which is a bit less than investors expect,” it said.