News & analysis

The National Bank of Poland (NBP) maintained the base rate at 5.75% for the ninth meeting in a row, matching both our own expectations and market consensus.

That said, with policymakers having consistently signalled an intention to keep rates at their current levels through the remainder of the year, today’s decision comes as little surprise. What is curious, however, is the upgrade to the Bank’s inflation projections for 2024 and 2025. While this goes some way to justifying the recent hawkish rhetoric from policymakers, it flies in the face of data outturns that have seen inflation not only return to target, but consistently undershoot expectations so far this year.

Against this backdrop, all eyes are set to be on Governor Glapinski’s press conference tomorrow. For now, though traders are holding their fire, with the zloty little moved following today’s announcement.

Looking at today’s decision in more detail, sell-side desks were unanimous in advance of this latest meeting, with all 35 economists surveyed by Bloomberg expecting rates to stay on hold. Indeed, we shared this sentiment given the consistency of recent commentary from NBP speakers, suggesting that no rate cuts would be forthcoming this year.

Even so, we think that economic fundamentals arguably support a more dovish stance, particularly towards year-end. June CPI printed at 2.6% YoY, in the middle of the NBP’s target band.

In fact, inflation data has now printed within the Bank’s 2.5+/-1% target band in every release this year bar January, while both headline and core inflation grew by just 0.1% MoM in May, with the former also growing by a similarly anaemic rate of 0.1% in June indicating little inflation momentum. Granted, core inflation remained elevated at 3.8% YoY in May. But this was down on the 4.1% growth recorded in April, and below market expectations of 3.9%. Moreover, while robust wage growth remains a concern, the expiry of inflation shielding measures have proven much less impactful than Bank staff had initially suggested was likely, with indications that increased costs are being absorbed into firm margins rather than fully transmitted to consumers.

With this in mind, today’s upgrade to the Bank’s inflation projections look like something of a stretch to us. Annual price growth is now expected to be in the range of 3.1 – 4.3% in 2024 (previously 2.8 – 4.3%) and 3.9 – 6.6% in 2025 (previously 2.2 – 5.0%).

We are inclined to think that the Bank is overestimating the forward-looking risks to inflation once again, placing too much emphasis on the impact of withdrawal of inflation shielding measures and expectations, with both having arguably proven less significant upside risks than the Bank has consistently assumed throughout the disinflation process.

While we do expect headline price growth to climb towards the back end of the year given that core inflation pressures remain elevated, we doubt it is likely to rise quite as much as suggested by Bank staff today. However, that point notwithstanding, for now today’s statement adds further support to the idea that the NBP will not cut rates again this year, confirming the assertions of NBP speakers, and the suspicions of sell-side economists.

Taking all into account then, zloty traders are standing pat awaiting tomorrows’ press conference, and hopefully further clarity on this latest set of inflation forecasts.



Nick Rees, FX Market Analyst


This information has been prepared by Monex Europe Holdings Limited, part of Monex S.A.P.I. de C.V. (“Monex”). The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. All entities in the “Monex” group of companies are regulated for different products and services within the jurisdictions in which they operate. Details of the different entities can be found here. Details of the respective entities’ regulated status and available products and services can then be found on the relevant links to the individual jurisdictions’ website.