Poland Set To Cut Rates Again On Soft Inflation

Daniel Carter

Summary:

Poland's central bank is likely to deliver its sixth interest-rate cut this year after inflation slowed more than expected, slipping below policymakers' target.

The rate-setting Monetary Policy Council will cut the key rate by 25 basis points to 4%, the lowest level since March 2022, according to 27 of 32 economists surveyed by Bloomberg. The remaining six analysts expect borrowing costs to remain unchanged.

Governor Adam Glapinski hasn't ruled out further easing, though has given no time frame for potential cuts. Often setting the tone for the 10-member MPC, the central bank chief has indicated that a rate at 4% isn't excessive if inflation stabilizes.

A cut on Wednesday would be a fifth consecutive reduction as policymakers respond to inflation that's eased to 2.4% in November, down from 4.9% at the start of the year. The move would be in line with MPC members, including Wieslaw Janczyk and Ireneusz Dabrowski, who have signaled that further easing in December is possible if data continue to register slowing inflation.

"Taking our inflation forecast as face value, we struggle to see the terminal rate at 4% — as suggested by Glapinski's latest remarks — with the MPC likely facing increasing pressures to ease rates as the inflation outlook proves to be consistently favorable during 2026," said Juan Orts, Societe Generale SA's economist for central and eastern Europe, the Middle East and Africa.

Orts expects inflation to remain bellow the MPC's 2.5% target next year, while the central bank will reduce its benchmark to 3.5% in the second quarter — and possibly even lower later in 2026. A greater appetite for reductions — including a surprise cut in October — has belied recent "hawkish rhetoric," Orts said, prompting analysts to shift expectations.

"Actions count more than words, and after the surprise cut in October, it become clear to us that the MPC had a lot more appetite for rate cuts than what we had initially believed," the economist said.

Glapinski, who backed elevated rates throughout 2024 as he blamed the government for loose fiscal policy and uncertainty over a cap on energy prices, has eased off his rhetoric targeting the government in recent months.

He'll hold a news conference at 3 p.m. on Thursday.

Source: Bloomberg Europe

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