National Bank of Poland to hold rates as inflation pressures remain contained
Lead — The National Bank of Poland (NBP) is projected to maintain its interest rate at 3.75% in the upcoming meeting on November 4, as inflation indicators suggest contained pressures. Per the full note by ing-think, although October inflation is reaching upper thresholds of the target bands, core inflation is likely below 3%, allowing the NBP to adopt a 'wait and see' approach amidst a loose labor market. Market participants should closely monitor the upcoming macroeconomic projections, which could influence the NBP's communications ahead of potential rate adjustments in 2027.
What the desk is arguing
The desk anticipates that the NBP will hold its rate steady at 3.75% for the foreseeable future given the current inflation dynamics in Poland. The cautious approach aligns with recent macroeconomic trends indicating that core inflation remains subdued, suggesting limited immediate pressure for policy tightening. Per the full note by ing-think, the NBP's decision will hinge on inflation forecasts and the evolving energy price landscape.
Current indicators point to a potential decline in core inflation, which has likely slipped below 3%. This gives the NBP room to remain on hold while assessing both domestic economic conditions and global developments. The expected trajectory for inflation, particularly as energy prices are forecasted to remain stable, plays a critical role in this decision-making process.
Where it sits in our coverage
Currently, there are no coinciding internal targets or forecasts that reflect the NBP's stance in the context of the broader FX landscape. However, the prevailing sentiment is that many investors are keenly awaiting details on inflation projections that may direct the NBP's future direction.
How other firms see it
Opinions are relatively mixed among analysts observing the NBP's policy landscape. jpmorgan is aligned with the current hold stance while bofa diverges, considering a potential for rate hikes sooner than currently anticipated. This divergence could create volatility in the PLN/USD pair as traders react to evolving insights regarding monetary policy. Key indicators related to consumer inflation and employment statistics will also serve as barometers for future NBP decisions.
What the calendar says
There are no immediate events in the calendar that would provide new insights or impact the NBP’s upcoming decision, underscoring the importance of the next inflation projection as a critical data point.
Key takeaways
- 01NBP expected to hold interest rate at 3.75% on November 4.
- 02Core inflation likely fell below 3%, providing room for a 'wait and see' approach.
- 03Macro projections will be crucial for understanding NBP's future policy trajectory.
- 04Energy price developments could impact inflation forecasts into 2027.
Market implications
Traders should focus on the NBP's inflation projections as a key determinant for future monetary policy direction. Stability in PLN should be closely monitored near the 3.75% mark, especially as new data emerges post-meeting.
Risks to this view
Any indication of accelerating inflation or unexpected energy price surges could force the NBP into a hawkish pivot much sooner than anticipated, potentially leading to rate hikes in early 2027.
Articles National Bank of Poland to hold rates as inflation pressures remain contained Published 12:00 Poland Translate Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The NBP is likely to leave rates at 3.75% on 4 November as underlying inflation pressures remain contained. Attention will focus on the new inflation projection and energy price risks, but we expect rates to stay unchanged through the end of 2026 before 50bp of hikes in 1Q27 Rafal Benecki and Adam Antoniak The National Bank of Poland is likely to leave rates at 3.75% at its meeting this week The National Bank of Poland (NBP) is expected to keep interest rates unchanged on Wednesday, with the reference rate remaining at 3.75%. Although preliminary data showed October inflation at the upper limit of the tolerance band around the central bank’s target, the composition of price growth does not suggest that inflationary pressures are becoming more widespread.
Core inflation excluding food and energy likely fell below 3%, giving the Monetary Policy Council (MP) room to “wait and see” and continue to monitor domestic and global developments before taking further action. The new macroeconomic projection will be an important part of the discussion at the Council’s November meeting. If it points to elevated inflation around the turn of 2027 and 2028, the NBP may adopt a more hawkish tone.
The scale of regulated-price increases from the beginning of 2027 – particularly for gas – will also be important, as these could lift the entire inflation path. However, government representatives have already signalled possible intervention in the gas market, on top of the existing price cap on gasoline prices. Our core inflation model presents a benign core inflation path when the energy shock expires somewhere in 2027, with the main anchor being contained wage growth.
Labour market conditions are looser than during the pandemic-driven inflation shock and following Russia’s invasion of Ukraine in 2022. The current government is also pursuing a tighter wage policy, raising the minimum wage by just 3% in 2027 for the second consecutive year, compared with increases of around 20% in 2023-24. With wage growth forecast to remain below 6% in 2027, the risk of second-round effects in Poland remains limited.
This contrasts with the Czech economy, where minimum wages and public-sector pay are rising more quickly. That is why we expect interest rates to remain unchanged until the end of 2026. We see hikes in 1Q27, but later and in smaller magnitude than expected by the yield curve.
Our rationale is that a prolonged energy crisis raises the risk that elevated inflation will become entrenched and the NBP will decide to provide a kind of insurance tightening. Further rate hikes by major central banks could also prompt the NBP to signal its readiness to address inflation risks. At the same time, the risk of PLN weakening is rather secondary, given the low pass-through from PLN to inflation (10% PLN weakening adds 0.2pp to inflation).
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