MNI NBP WATCH: Rates Hold Expected, But Easing Debate Nears

MNI (LONDON) - The National Bank of Poland is universally expected to keep rates unchanged on Wednesday in line with guidance and as inflation remains persistently above target, with a focus on the accompanying language amid disagreement on the Monetary Council about when to discuss cuts.

Governor Adam Glapinski said rates could stay unchanged until 2026 after the NBP held the reference rate at 5.75% for the 10th month in a row in July, but other members have suggested cuts might begin earlier, with Ludwik Kotecki saying a large majority of members see potential for a discussion about easing by as early as the first quarter of 2025.

 July’s statement simply said that the Council judges “that the current level of the NBP interest rates is conducive to meeting the NBP inflation target in the medium term.” (See MNI EM INTERVIEW: NBP Likely To Hold Rates In 2024 - Dabrowski)

July’s Inflation Report projected headline inflation will peak at 6.3% Y/Y in 1Q2025 before returning to the tolerance band of 2.5% +/- 1% in 1Q2026 and hitting the point-target by the end of 2026. But the timing of inflation’s maximum point will depend on whether the government decides to extend an energy price cap into next year.

Annual CPI inflation rose from 4.2% in July to 4.3% in August, while core inflation is unlikely to have declined much from 3.8% over the same period. Second-quarter GDP growth of 3.2% YoY was up from 2% earlier in the year, driven predominantly by private consumption - following big increases in public sector pay and tight labour markets - and military spending.