Poland’s central bank cut its main interest rate (PLINTR=ECI) by another 25 basis points to 4.00% on Wednesday, in line with most analysts’ expectations, after November inflation came in lower than forecast.
A flash estimate from the statistics office showed inflation fell to 2.4% in November year-on-year, down from 2.8% in October and below the 2.6% expected by analysts.
The National Bank of Poland targets inflation of 2.5% plus or minus one percentage point.
“Taking into account inflation developments and its outlook for the subsequent quarters, in the Council’s assessment, it became justified to adjust the level of the NBP interest rates,” the central bank said after the meeting ended on Wednesday.
“Further decisions of the Council will depend on incoming information regarding prospects for inflation and economic activity.”
The central bank reiterated that the risk factors for the inflation outlook include the shape of fiscal policy, the recovery of demand in the economy, as well as the development of wage dynamics, energy prices and global inflation.
The market is waiting for Thursday’s press conference of NBP Governor Adam Glapinski, who will present the justification for Wednesday’s decision, while investors are considering further moves by the Monetary Policy Council.
The NBP has now cut rates six times this year, by a total of 175 basis points, and may continue easing monetary policy next year.
“After such intense rate cuts, there will most likely be a pause. In my opinion, today’s cut does not end the ‘cycle of adjustments’ in interest rates, and the Council did not write anything in the statement that would suggest closing the door,” wrote Monika Kurtek, chief economist at Bank Pocztowy.
“Therefore, it cannot be ruled out that the MPC will refrain from cutting interest rates again until April (because then it will have a full picture of inflation), although the March NBP projection may also prove to be a good opportunity if the statistical office signals that the CPI index is still around 2.5%.”
In March the statistical office updates the inflation basket, and the central bank publishes new inflation forecasts.