National Bank of Poland preview: Inflation at 4%, but MPC unlikely to act yet
The Polish Monetary Policy Council (MPC) is expected to maintain the policy rate at 3.75% during its meeting on October 7, despite inflation rising to 4.0% year-on-year. This decision hinges on limited price pressures outside of the fuel sector and an anticipated reduction in inflation due to government interventions. Per the full note from ing-think, macroeconomic projections in November could signal the earliest opportunity for rate hikes, likely occurring in the first quarter of 2027 with two increments of 25 basis points each.
What the desk is arguing
The desk anticipates that the National Bank of Poland will keep its interest rate stable at 3.75% as there are no immediate indicators supporting monetary tightening. Per the full note from ing-think, the current inflation level, albeit above target, will be moderated by recent government fuel policy changes.
Moreover, the report emphasizes that inflation's rise is primarily driven by fuel prices, suggesting the MPC can afford to remain patient before making policy shifts. Notably, the fuel market intervention is projected to reduce inflation by approximately 0.7 percentage points.
Where it sits in our coverage
Our consensus target for EUR/PLN is currently set at 1.075, falling within a range of 1.04 to 1.12. Specific forecasts include: - jpmorgan: 1.10 (target for Mar26) - bofa: 1.04 (target for Mar26)
This outlook aligns with the broader consensus, as our call is centrally positioned and does not deviate significantly from expectations set by other firms.
How other firms see it
Aligned firms such as jpmorgan are advocating for a stable rate approach, reflecting a unified stance among several analysts. Conversely, bofa stands out with a more cautious forecast, suggesting a quicker response from the MPC might be necessary than currently anticipated.
Interest in closely monitoring EUR/PLN movements is warranted, particularly given the influences of regional developments and potential spillovers from broader ECB policies that intersect with this forecast.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01The MPC is likely to keep rates at 3.75%, with potential hikes projected for Q1 2027.
- 02Inflation is currently at 4.0%, driven mainly by rising fuel prices.
- 03Government interventions are expected to ease inflation, providing room for the MPC to hold steady.
- 04Upcoming macroeconomic projections in November may influence future rate decisions.
Market implications
Trade positioning on EUR/PLN remains pivotal, especially as markets react to central bank communications. A shift beyond the 1.08 level could signal changing sentiment regarding inflation's trajectory.
Risks to this view
Potential risks to this outlook include unexpected spikes in global commodity prices or geopolitical tensions that could further elevate inflation, prompting a more aggressive policy response from the NBP sooner than anticipated.
Older quick take Quick take Published 11:45 Poland National Bank of Poland preview: Inflation at 4%, but MPC unlikely to act yet We expect the Polish central bank to keep policy rates unchanged on 7 October. Although inflation is well above target, there are no immediate signs of any broader price pressure or second-round effects, and another intervention in the fuel market (lowered excise duty and VAT) will reduce the price of gasoline for the rest of the year We expect Polish rates to remain unchanged at the October central bank meeting On Wednesday 7 October, the Monetary Policy Council (MPC) will announce its interest rate decision. We expect the Council to leave the National Bank of Poland's policy rate unchanged at 3.75%.
We see November as the first meeting at which the MPC could change policy, as a fresh set of macroeconomic projections will then be available. We believe there is still time to wait-and-see, and we expect rate hikes in the first quarter of 2027 (two 25bp moves). On the one hand, inflation rose to 4.0% YoY in September.
The government intervention in the fuel market will deduct 0.7pp from CPI, but it is likely to remain around the upper end of the tolerance band around the target in the coming months. This means that the real interest rate will remain close to zero in the short term. On the other hand, the composition of inflation suggests that price pressures are still, in essence, limited to fuel prices, indicating that the RPP has time before deciding whether any monetary policy tightening is required.
The third intervention in the fuel market (lowered excise duty and VAT until the end of 2026) reduces the projected inflation path and brings inflation back towards the upper end of the tolerance band around the target. However, the situation in the Middle East remains unstable, with the US strengthening its military presence in the region. This is prolonging the period of elevated commodity prices and inflation and, in our view, may require the MPC to implement a pre-emptive rate hike in 1Q27 to prevent inflation from becoming entrenched at an elevated level.
Policymakers will also eye the composition of inflation, particularly whether core inflation remains stable ahead and second-round effects are avoided. NBP rates Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.
Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Rafal Benecki Chief Economist, Poland Adam Antoniak Senior Economist, Poland Older quick take
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