Monetary Policy Council keeps interest rates intact

During a two-day session held on Tuesday and Wednesday, the MPC decided to keep the NBP interest rates unchanged in November:

Economic experts surveyed before the MPC November session expected a decrease in interest rates by 25 base points.

The MPC has already lowered the interest rates twice before - in September and October, by 75 and 25 base points, respectively.

The National Bank of Poland President Adam Glapiński is expected to hold a press conference related to the last MPC session on Thursday (Nov. 9).

"According to Statistics Poland flash estimate, annual CPI inflation in October 2023 markedly declined again, falling to a level of 6.5% y/y (compared to 8.2% y/y in September 2023)," the MPC said in a statement released following the November session.

"The decrease in inflation in annual terms was driven mainly by a fall in annual price growth of energy as well as food and non-alcoholic beverages. Considering the Statistics Poland data, it can be estimated that core inflation also decreased again in October. In September 2023 producer prices were again lower than a year ago, which confirms the fading of most external supply shocks and a reduction of cost pressures. Together with the low economic activity growth, it will support a further decline in consumer price inflation in the coming quarters," we read.

The MPC said it got "acquainted with the results of the November projection of inflation and GDP based on the NECMOD model".

"In line with the projection, prepared under the assumption of unchanged NBP interest rates and taking into account data available until 23 October 2023, there is a 50-percent probability that the annual price growth will be in the range of 11.3 – 11.5% in 2023 (against 11.1 – 12.7% in the July 2023 projection), 3.2 – 6.2% in 2024 (compared to 3.7 – 6.8%) and 2.2 – 5.3% in 2025 (compared to 2.1 – 5.1%)," the Council said.

"At the same time, the annual GDP growth – according to this projection – will be with a 50- percent probability in the range of -0.1 – 0.6% in 2023 (against -0.2 – 1.3% in the July 2023 projection), 1.9 – 3.8% in 2024 (compared to 1.4 – 3.3%) and 2.4 – 4.7% in 2025 (compared to 2.1 – 4.4%). Inflation developments, both in the short and in the medium term, are fraught with uncertainty related i.a. to future fiscal and regulatory policies," the rate-setting body added.

According to the MPC, "incoming data indicate low demand and cost pressures in the Polish economy, which amidst weakened economic conditions and falling inflation pressure abroad will support a gradual decline in domestic inflation".

"Considering the adjustment in the NBP interest rates introduced in recent months, together with uncertainty about a future course of fiscal and regulatory policies and their impact on inflation, 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 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 concluded.