NBP keeps interest rates unchanged in January

At a decision-making meeting held on 8-9 January 2024, the Monetary Policy Council (MPC) decided to keep the NBP interest rates unchanged:

In 2023 the NBP reference rate dropped by a total of 100 base points. This was a result of two decision made by the MPC in the second half of last year. The first one, taken in September, lowered the interest rates by 75 base points and was the first decrease since May 2020. A decrease by further 25 points followed in October. In the last two months of 2023, the MPC decided not to change the interest rates levels.

As a result, the January's session of the Council was the third in a row with no changes in the rates. The decision corresponded with market expectations.

Some economists claim that a further decrease in interest rates will not happen sooner than in March. It is also when the MPC is expected to have new forecasts regarding inflation and the GDP. Other experts argue that conditions needed for a decrease in interest rates will appear in the Q4 of this year or even in 2025.

"According to the Statistics Poland flash estimate, annual CPI inflation in December 2023 declined to 6.1% (from 6.6% in November 2023). Considering the Statistics Poland data, it can be estimated that the decrease in inflation in annual terms was driven by a fall in annual price growth of food and non-alcoholic beverages, as well as core inflation. However, an increase in annual price growth of energy had the opposite effect on annual inflation," the Council said in a statement released following the January's session.

"In November 2023, producer prices were again considerably lower than a year ago, which confirms the fading of most external supply shocks and a reduction of cost pressures. Together with the relatively low economic activity growth, it is conducive to a decline in inflation. The Council judges that the decrease in inflation is supported by the appreciation of the zloty exchange rate, which is consistent with the fundamentals of the Polish economy," it added.

The MPC also said that "incoming data indicate that despite the observed economic recovery, demand and cost pressures in the Polish economy remain low, which amidst weakened economic conditions and falling inflation pressure abroad will support a gradual decline in domestic inflation".

"In the coming months, annual CPI growth is likely to fall significantly, while the decline in core inflation will be slower."

"At the same time, inflation developments in subsequent quarters are associated with uncertainty, related in particular to the impact of fiscal and regulatory policies on price developments, as well as the pace of economic recovery in Poland. Against this background, the Council decided to keep the NBP interest rates unchanged. The Council judges that the current level of the NBP interest rates is conducive to meeting the NBP inflation target in the medium term," the rate-setting body said.