As expected, the Monetary Policy Council (RPP) decided today to cut interest rates by 25 basis points. The move was not obvious and divided economists into two camps — those supporting a cut and those favoring a pause. One argument for maintaining the current rate level was certainly the absence of new macroeconomic forecasts from the National Bank of Poland, which will only be published in November. A key risk factor — both now and in the coming months — remains the loose fiscal policy.
In our view, the recent easing on the labor market and greater confidence among policymakers regarding energy prices — which we associate with President Nawrocki’s signing of the law on the heating allowance and the freezing of energy prices until the end of the year — provided sufficient motivation for action. We also note a shift in the balance of risks for the inflation path in a more favorable direction, which further supported the decision to cut rates. Core inflation remains elevated, but its momentum appears relatively promising.
The market reaction of the Polish zloty was notably modest. Against the euro, the currency remains near the midpoint of the range it occupied throughout the summer (4.23–4.29), hovering close to our long-term forecast of 4.25. No significant volatility was observed on the Warsaw Stock Exchange either.
Perhaps more important for the market than the rate decision itself will be the upcoming press conference by NBP President Adam Glapiński. His remarks could help investors outline the future trajectory of interest rates and clarify the rationale for implementing the cut already in October rather than waiting until November — a scenario that many analysts had considered the base case.
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Source: CEO.com.pl – Reaction of the Polish zloty to the MPC’s decision remains muted
