Monetary Policy Council leaves interest rates unchanged again

During November 9 session the Monetary Policy Council decided to keep the NBP interest rates unchanged:

- reference rate at 6.75% on an annual basis;

- lombard rate at 7.25% on an annual basis;

- deposit rate at 6.25% on an annual basis;

- rediscount rate at 6.80% on an annual basis;

- discount rate on bills of exchange at 6.85% on an annual basis.

According to Statistics Poland flash estimate, inflation in Poland increased in October 2022 to 17.9% year on year.

In a press release published after Wednesday's session, the Council said that "the increase in inflation in recent months has been mainly due to a gradual pass-through of high commodity prices to consumer prices".

"High commodity prices were reflected in rising food and energy prices. At the same time, they boosted operating costs of enterprises, which – given the still relatively high demand – inclined firms to raise prices of consumer goods, contributing to higher core inflation. Core inflation was also driven by the effects of the persisting – though gradually easing – disruptions to global supply chains. At the same time, the Anti-inflationary Shield continued to curb CPI inflation," we read in the statement.

Furthermore, the Council said "there is a 50-percent probability that the annual price growth will be in the range of 14.4 – 14.5% in 2022 (against 13.2 – 15.4% in the July 2022 projection), 11.1 – 15.3% in 2023 (compared to 9.8 – 15.1%), 4.1 – 7.6% in 2024 (compared to 2.2 – 6.0%) and 2.1 – 4.9% in 2025".

"At the same time, the annual GDP growth – according to this projection – will be with a 50-percent probability in the range of 4.3 – 4.9% in 2022 (against 3.9 – 5.5% in the July 2022 projection), -0.3 – 1.6% in 2023 (compared to 0.2 – 2.3%), 1.0 – 3.1% in 2024 (compared to 1.0 – 3.5%) and 1.8 – 4.4% in 2025," it said.

The Monetary Policy 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 3/3 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," the statement said.