Interest rates kept unchanged for the fourth time in a row

Poland's Monetary Policy Council held a meeting on Wednesday, January 4, 2023.

The Council decided to keep the NBP interest rates unchanged:

- reference rate at 6.75%;

- lombard rate at 7.25%;

- deposit rate at 6.25%;

- rediscount rate at 6.80%;

- discount rate at 6.85%.

A press conference of National Bank of Poland President Adam Glapiński, who is also chairman of the Monetary Policy Council, is to be held on Thursday, January 5, at 3 p.m.

In order to tackle surging inflation, in October of 2021, the Monetary Policy Council began what later turned out to be a long series of increases in interest rates. As a result, the main, reference interest rate has increased from 0.1% to 6.75%. However, in October, November, and December of 2022, and now also in January 2023, the Council decided to leave the NBP interest rates as they were.

According to the latest data published by Statistics Poland, inflation in November was at 17.5% year on year. This means that inflation in Poland remains at levels unseen since 1997, which was 25 years ago. Statistic Poland is to release a flash estimate on December 2022 inflation on Thursday (January 5).

In a statement released along the interest rates announcement, the Monetary Policy Council said the recent data indicated a slowdown in economic growth. "According to Statistics Poland data, GDP growth in 2022 Q3 slowed down to 3.6% y/y. Monthly data for October and November suggest a further decline in GDP growth in Q4, whereas the economic outlook is subject to significant uncertainty. Despite the decelerating GDP growth, labour market situation remains good, which is reflected i.a. in a low unemployment rate. At the same time, however, LFS data for 2022 Q3 indicate a fall in the Polish LFS total employment".

"Inflation in Poland in November 2022 decreased to 17.5% y/y. The decrease in CPI in year on-year terms compared to October was driven by lower growth in prices of energy carriers and fuels. Inflation remains at a high level, which – to a great extent – stems from passing higher costs on to consumer prices. High commodity prices have been reflected in rising food and energy prices, and – together with persistent effects of the earlier disruptions in global value chains – increase operating costs of enterprises, which – given the still relatively strong demand – inclined firms to raise prices of goods, contributing to higher core inflation. In turn, the so-called Anti-inflationary Shield continued to limit CPI inflation. At the same time, in recent months, producer price growth declined which signals diminishing cost pressures on consumer prices," the Council added.

The Council also assessed "that the expected weakening of the external economic conditions, together with monetary policy tightening by major central banks, will curb global inflation and commodity prices". "The weakening of the global economic conditions will also hamper GDP growth in Poland. Under such circumstances, the hitherto significant monetary policy tightening by NBP will support a decline in inflation in Poland towards the NBP inflation target. At the same time, given strength and persistence of the current shocks that remain beyond the impact of domestic monetary policy, in the short term inflation will remain high, and its return to the NBP inflation target will be gradual. A decrease in inflation would be faster if supported by appreciation of zloty exchange rate, which, in the Council’s assessment, would be consistent with the fundamentals of the Polish economy".