Poland’s central bank (NBP) has once again lowered interest rates. However, after the surprisingly large cut last month, this time around the reduction was more modest and in line with market expectations.
The NBP’s rate-setting Monetary Policy Council (MPC) announced an interest rate cut of 0.25 percentage points, bringing it to 5.75 percent on Wednesday, but it is expected to be cautious about making further reductions because of the need to protect Poland’s currency, the zloty.
The latest move follows a 0.75 percent cut in September and comes amid expectations of a further fall in the rate of inflation.
According to Poland’s central statistics office (GUS), inflation has now fallen to 8.2 percent, the first single-digit inflation reading since February last year. Analysts see this move as the beginning of the cautious loosening of monetary policy after the MPC agreed on the need to protect the Polish currency when applying further rate cuts.
The MPC upheld the assessment that the decrease in inflation would be faster if supported by an appreciation of the zloty exchange rate, which would be consistent with the fundamentals of the Polish economy. Thus, the council has not ruled out interventions on the FX market.
The reduction in interest rates follows a year in which interest rates rose from a record low of 0.1 percent to 6.75 percent in a period of 12 months.
They were then held for a year at 6.75 percent before last month’s cut.