IMF Says Raising Rates Or Keeping Them Higher For Longer Would Help Curb Core CPI In Poland

The International Monetary Fund (IMF) released its latest country report after Article IV Consultation with Poland, recommending that the local central bank should raise interest rates or keep them higher for longer to contain core CPI inflation.

• IMF analysts adapted their Quarterly Projections Model (QPM) to Poland to analyse different possible paths of monetary policy. They noted that "the QPM response to a monetary policy shock is broadly consistent with NBP research on monetary policy transmission."
• While recognising the limitations of their model, IMF analysts "point to the possibility that the policy rate may need to be increased further or held at its peak for longer to reduce core inflation to the target by the end of 2025."
• "While the analysis suggests that a scenario that many market participants expect – constant rates through 2023 followed by rate cuts – could be consistent with such a reduction in inflation within the monetary policy horizon, this path appears to be narrow."
• The full report can be found under this link. As a reminder, the NBP will announce their next rate decision on Tuesday.