Poland: National Bank of Poland leaves rates unchanged in December
Latest bank decision: At its meeting on 3–4 December, the Monetary Policy Council of the National Bank of Poland (NBP) decided to keep interest rates unchanged, as expected, with the reference rate at 5.75%, the Lombard rate at 6.25% and the deposit rate at 5.25%.
Monetary policy drivers: The key domestic factors influencing the Central Bank’s decision included elevated inflation amid rising domestic energy tariffs and other regulatory factors. Additionally, marked wage growth, partly due to public sector increases, continues to fuel domestic price pressures. However, demand and cost pressures in the Polish economy remain relatively low, while international economic conditions and inflation pressure have weakened.
Policy outlook: The NBP did not provide explicit forward guidance on the future direction of interest rates but mentioned the possibility of intervening in the foreign exchange market. That said, Governor Glapinski struck a hawkish tone in a subsequent press briefing, hinting that potential rate-cutting discussions will likely be delayed beyond the previously cited date of March. Our Consensus is for about 100 basis points of rate cuts by the end of 2025, with the first likely in Q2. However, weaker-than-expected GDP growth could prompt an earlier start of the NBP’s loosening cycle.
Panelist insight: ING analysts commented:
“So far, we have assumed 100bp of cuts next year, significantly less than the market has been pricing up until recently (225bp). Today, our scenario seems optimistic. This calls for a stronger zloty and a flattening of the yield curve. The short end should suffer by reducing the expectations for cuts priced in. But at the same time, a hawkish MPC supports the long end of the curve, at the expense of economic growth, because the NBP has cemented its position as the most hawkish central bank in the region, and perhaps even in Europe.”