Introduction to Poland’s Economic Policy
Poland’s central bank made a surprising move on Wednesday by cutting its main interest rate by 25 basis points to 5%. This decision was based on the bank’s expectation of a significant decline in inflation over the coming months.
Reasoning Behind the Decision
The Monetary Policy Council (MPC) stated that according to available forecasts, the Consumer Price Index (CPI) inflation is expected to fall below the upper bound for deviations of the National Bank of Poland’s (NBP) inflation target. As a result, the Council deemed it necessary to adjust the level of the NBP interest rates. This move indicates that the central bank is taking a proactive approach to managing inflation and promoting economic stability.
Current Inflation Rates
Poland’s statistical office reported that annual inflation in June was 4.1%, which is slightly higher than the forecasted 4.0% and up from a revised 4.0% in May. The central bank’s inflation target is set between 1.5% and 3.5%. Although the current inflation rate is above the target range, the bank expects it to decrease in the future.
New Forecasts for Inflation and Economic Growth
On Wednesday, Poland’s central bank published new forecasts for inflation and economic growth. These forecasts indicate that the pace of price growth will be lower than expected in the previous projection from March. The central bank predicts inflation rates of 3.5%-4.4% in 2025, 1.7%-4.5% in 2026, and 0.9%-3.8% in 2027. In comparison, the previous forecasts expected inflation rates of 4.1%-5.7% in 2025, 2.0%-4.8% in 2026, and 1.1%-3.9% in 2027.
Potential Future Changes
Analysts believe that the MPC may decide to further ease monetary policy. The new forecasts are consistent with the possibility of further cuts in interest rates. Economists from mBank noted that the projection is consistent with further cuts, which would be in line with the current monetary policy cycle.
Upcoming Press Conference
NBP President Adam Glapinski is scheduled to hold a press conference on Thursday to discuss the reasons behind the latest rates decision and potentially provide guidance on future monetary policy. This conference will offer valuable insights into the central bank’s decision-making process and its plans for managing the economy.
Previous Monetary Policy Decisions
In May, Poland’s central bank cut the cost of credit by 50 basis points, reducing its main interest rate to 5.25%. However, it left interest rates unchanged last month, citing economic uncertainty and the need for incoming data to guide future decisions. The central bank’s president, Adam Glapinski, emphasized that the bank would not commit to a specific future rates path due to the uncertain economic conditions.
Conclusion
Poland’s central bank has taken a significant step by cutting its main interest rate to 5%. This decision is based on the expectation of a decline in inflation and is supported by new forecasts for inflation and economic growth. As the bank continues to monitor the economy and make adjustments to monetary policy, it is likely that further changes will be made to promote economic stability and growth. The upcoming press conference with NBP President Adam Glapinski will provide valuable insights into the bank’s decision-making process and its plans for the future.
