The National Bank of Poland (NBP) announced on Wednesday that it would keep its primary interest rate unchanged at 3.75%, adopting a cautious posture even as price growth slowed in June.
All 29 respondents in a poll published on Monday predicted the NBP would keep its main rate unchanged in July, reflecting broad market expectations for policy stability.
Inflation moderated to 2.5% in June from 3.1% in May, a decline that undershot analyst forecasts and placed the inflation rate back in the centre of the central bank’s 1.5%-3.5% target band.
Monika Kurtek, chief economist at Bank Pocztowy, said the decision by the Monetary Policy Council (MPC) was to be expected. "Today’s MPC decision is not a surprise and, in fact, it could not have been otherwise. Inflation has begun to decline over the past two months, returning to the centre of the NBP’s inflation target in June," she noted. "This has, in a sense, relieved the Council of the burden of considering interest rate increases."
At the same time, central bank officials signalled they remain wary of forces that could reverse the recent moderation in prices. The pace of price growth could quicken in the near term after a government program that has limited fuel price increases expires, and tensions in the Middle East were flagged as a source of continued uncertainty that could propagate through commodity markets.
Kurtek emphasised the prudential rationale behind the Council’s stance: "This calls for extreme caution when it comes to easing monetary policy. In this situation, the Monetary Policy Council has no choice but to wait and observe the environment," she said. "Rates were not changed today, and in the coming months, unless something very surprising happens, they will remain at their current levels - in my opinion, at least until the end of this year."
The MPC’s formal statement and updated central bank inflation projections were scheduled for release later on Wednesday, and NBP Governor Adam Glapinski was due to hold a press conference on Thursday to elaborate on the decision and the outlook.
Earlier, in June, the Monetary Policy Council had already maintained the benchmark rate at 3.75% for a third consecutive month. At that time, Governor Glapinski said Polish interest rates were at an appropriate level and that slowing inflation had reduced the likelihood of monetary tightening.
For now, policymakers appear to be balancing the recent improvement in headline inflation against risks that could push prices higher again, opting to hold policy settings steady while collecting further information from incoming data and developments in commodity markets.