Monetary Policy Council decreases interest rates by 75 basis points

Majority of the economists from the largest banks in Poland did expect a decrease in the interest rates, however, a smaller one - by 0.25%.

This is the first decrease in interest rates since May 2020 when they were lowered by 40 basis points, setting the reference rate at 0.10%

The Monetary Policy Council (MPC) has set the NBP interest rates at the following levels:

The resolution of the Monetary Policy Council will enter into force on 7 September 2023.

NBP Governor and MPC Chairperson Prof. Adam Glapiński is to hold a press conference regarding the latest decision on Thursday (Sept. 7).

The next MPC decision-making session has been scheduled for October 3-4.

"According to Statistics Poland flash estimate, annual CPI inflation in August 2023 markedly declined again, falling to a level of 10.1% y/y (compared to 10.8% y/y in July 2023). At the same time, in monthly terms, the overall consumer price level did not change in August, following a decline by 0.2% in July. The decrease in inflation in annual terms was driven mainly by a fall in annual price growth of food and non-alcoholic beverages," the MPC said in a statement released following the decision.

"Taking into account the data by Statistics Poland, it can be estimated that core inflation decreased again in August, as well. In July 2023 the producer prices were lower than a year before, which confirms the fading of external supply shocks and a reduction of cost pressures. Together with the lower economic activity growth, it will support a further decline in consumer price inflation in the coming quarters. The significant fall in inflation is accompanied by decreasing inflation expectations, which contributes to an increase in the restrictiveness of monetary policy," the Council added.

It has also assessed that "recently incoming data point to a weaker demand pressure than previously expected, which will contribute to a faster return of inflation to the NBP inflation target". "Considering these circumstances – and taking into account the time lags in the monetary policy transmission to the economy – the Council adjusted NBP interest rates, which will be conducive to meeting the NBP inflation target in the medium term. The Council upheld the assessment that the decrease in inflation would be faster if supported by an appreciation of the zloty exchange rate, which would be consistent with the fundamentals of the Polish economy," the MPC said.