Central Bank leaves rates unchanged in November

Latest bank decision: At its meeting on 5–6 November, the Central Bank (NBP) decided to keep its interest rates unchanged, 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 NBP’s decision included inflation, which rose to a year-to-date high of 5.0% in October (September: 4.9%), fueled by rising retail energy prices and strong wage growth. In addition, the Bank expects inflation to remain elevated through early 2025, with uncertainty surrounding the impact of higher energy prices on inflation expectations. Meanwhile, the NBP acknowledged that GDP growth could have fallen below Q2’s level in Q3, according to incoming data; this likely dissuaded a shift in the Bank’s stance.

Policy outlook: The Central Bank did not provide specific forward guidance on the future direction of interest rates but restated its commitment to bringing inflation down to the NBP target of 1.5–3.5% in the medium term. In a separate press briefing, Governor Glapinski stated that the first cut could materialize in March 2025 but that resuming the easing cycle remains dependent on forecast inflation falling toward the target. Our Consensus is for the reference rate to end 2024 at its current level and decrease by about 100 basis points in 2025. Stronger-than-expected energy prices and wage growth pose upside risks to the policy rate, while weaker-than-expected GDP growth is a downside risk. The Bank will reconvene on 3–4 December.

Panelist insight: ING analysts commented on the outlook: “The MPC is waiting for CPI inflation to stabilise, even at a high level of 5-6% YoY, but it needs to pass the peak. An additional condition to ease is a projection showing CPI falling to the NBP target. At that point, the discussion will start, and a cut may follow. […] We still think the MPC will cut rates by 100bp in total in 2025, starting from the second quarter, but now we think the odds are perhaps lengthening that they could go a little harder a little later.”

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