Poland Central Bank Keeps Policy Rate Unchanged At 5.75%

The National Bank of Poland maintained its key policy rate for the fourth straight meeting, as expected, on Wednesday, reflecting the cautious approach amidst a volatile inflation outlook.

The Monetary Policy Council, led by Governor Adam Glapinski, decided to hold the benchmark interest rate at 5.75 percent, the central bank said in a statement.

The lombard and deposit rates were similarly kept unchanged at 6.25 percent and 5.25 percent, respectively.

The previous change in the rate was a 100-basis-point cut in October 2023.

Recent official data showed that Poland's inflation eased to 6.2 percent in December from 6.6 percent in November. Nonetheless, the inflation was still above the target range of 1.5-3.5 percent.

Despite this inflationary pressure, the NBP opted to uphold its current monetary policy stance, prioritizing stability amid economic uncertainties.

Capital Economics economist Nicholas Farr said an interest rate cut at the next meeting in March looks finely balanced and policymakers may deliver a 25 bps cut at that meeting.

However, the economist said there is only limited scope for monetary easing this year, as a tight labor market and a recovery in economic activity will keep demand-side price pressures strong.

Further, core inflation is unlikely to fall back to the NBP's target range on a sustainable basis until 2025, the economist said.

"Our current forecast is that interest rates are cut by 100bp over 2024 as a whole, but the risks are skewed to rates staying higher," Farr added.

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