MNI NBP WATCH: Cut, Or Wait Until Fresh Projections

The National Bank of Poland could cut its policy rate by 25 basis points for a third successive meeting this week, as inflation eases and industrial data remain weak, though policymakers may opt to wait for a fresh round of macroeconomic projections in November.

Analysts are divided over its decision to be announced on Wednesday, as the central bank weighs slower wage growth, sluggish external demand and the extension of the energy price freeze against an outlook for inflation still seen ending the year averaging 3.9% in July’s projection exercise, above the 2.5% target. But any interim CPI update this week should no longer show inflation rebounding above the tolerance band into year-end.

July's projections saw inflation falling to 3.1% in 2026 and 2.4% in 2027, with projected GDP growth easing 1.1 percentage points in the period to 2.5% in 2027.

The NPB cited slowing inflation when it cut the reference rate to 4.75% last month, and the rate of price increases has continued to slow, with August CPI increasing by 2.9%, versus 3.1% in July. Core inflation was 3.0% last month after July’s 3.2%, down from nearly four per cent in March, though services prices increased by 6.0% in annual terms in August, a rise of 0.7 percentage point on the previous month.

“Fiscal policy, consumption demand recovery and elevated wage growth remain risk factors for low inflation,” according to September’s decision statement, just as ratings agencies Fitch and Moody’s downgraded Poland’s outlook from ‘stable’ to ‘negative’.

This, coupled with the fact that the NBP has already eased by 100bp this year, may offer policymakers a chance to draw breath before deciding how quickly to take the deposit rate to its probable terminal level of 4.0% in 2026.