Polish interest rates remain unchanged despite fall in inflation

The bank is acting cautiously, as it remains unclear how the new Polish government will approach economic policy

editor: REMIX NEWS
author: salon24.pl

Poland’s central bank has opted to retain its current interest rates despite a fall in inflation last month, the bank’s Monetary Policy Council (MPC) announced on Wednesday.

The reference rate will remain at 5.75 percent, the Lombard rate at 6.25 percent, the deposit rate at 5.25 percent, and the discount rate at 5.85 percent, the bank’s rate-setting body confirmed in a statement.

Analysts had expected the MPC to cut interest rates by 0.25 percentage points because of better-than-expected inflation figures in the last two months. However, the national bank and the MPC decided that in order to ensure that progress against inflation is maintained, it was better to be cautious.

This caution may have also been borne from the fact that it is not yet clear what the new government intends to do. If it carries out its promises of a hike in public sector pay of 20 percent, zero-rate mortgages for first-time home buyers, and double the income tax threshold, then the economy may receive an inflationary impulse which will prevent further interest rate reductions in the coming months. 

The action taken by the central bank should help Poland’s currency to strengthen. The value of the Polish złoty rose to PLN 4.43 to the euro on Wednesday afternoon following the unexpected decision to leave interest rates unchanged.

Poland’s MPC paused hiking interest rates after raising its reference rate to 6.75 percent in September 2022 and then adopted a wait-and-see approach for months before officially ending the tightening cycle in July.

In September of this year, it surprised the markets with a large cut of 0.75 percent in the basic interest rate. 

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