Poland: Neutral NBP stance supports stable Zloty – ING

ING economists expect National Bank of Poland (NBP) rates to stay unchanged after April’s decision to hold the reference rate at 3.75%. They highlight a neutral Monetary Policy Council stance, with decisions driven by energy prices, geopolitics, fiscal policy and wage dynamics, and see rate hikes as unlikely under current conditions.

NBP seen on prolonged policy hold

“As expected, the Monetary Policy Council (MPC) left the National Bank of Poland’s (NBP) interest rates unchanged, with the reference rate remaining at 3.75%. The press release following the April MPC meeting was very brief and neutral in its tone. It highlights that, as a result of supply constraints caused by the conflict in the Middle East, fuel prices have risen globally.”

“After the delivery of a 25bp NBP rate cut in March (and despite the outbreak of conflict in the Middle East), the MPC has adopted a more neutral stance and a wait-and-see approach in April. The Council’s attention will now focus on incoming data and assessing the impact of the geopolitical and commodity situation on inflation prospects and economic activity. Rate hikes are off the agenda under the current circumstances.”

“According to the NBP governor, in the coming months, inflation will depend on prices of energy commodities (oil, natural gas) and domestic regulatory and tax decisions (excise duty and VAT on fuels), which are aimed at soothing the shock. The MPC will also focus on the pass-through of higher fuel prices into prices of other goods.”

“As for future decisions by the Council, these will depend on changes in commodity prices and the geopolitical situation, with fiscal policy and regulations concerning fuel prices, as well as changes in GDP and wage dynamics, posing risk factors.”

“Our baseline scenario assumes that the Lower Fuel Prices programme (CPN) will be maintained until the end of July this year, and average annual inflation will amount to 3.2%, compared to a roughly 2% estimate before the outbreak of war in the Persian Gulf and 2.3% in the NBP’s March projection. This will allow the MPC to keep interest rates unchanged at least until the end of 2026, and we assess the probability of rate hikes as low.”

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)