Page 7 - bne IntelliNews Poland Outlook 2025

toughened its narrative and has held firm in all its rate-setting meetings since, keeping the reference interest rate at a 20-year high of 5.75%.
That stance is at odds with the approach of central banks in developed economies and elsewhere in Central and Eastern Europe. There also is a lack of clarity as to what path Poland’s monetary policy is going to take under the NBP Governor Adam Glapinski and the current Monetary Policy Board, the NBP’s rate-setting body. RPP communications suggest a reluctance among central bankers to make rapid interest rate cuts.
The consensus now is that the RPP will aim to maintain the current level of interest rates until May, with the campaign ahead of the presidential election being a factor. Analysts see room for cuts in the second half of next year, although the timing of the first cut is difficult to determine, given the NBP’s erratic communications.
Considering low unemployment, still elevated wage growth, the potential increase in inflation expectations in the second half of 2024 and uncertainty over the direction of energy prices, interest rates are forecast to decrease by no more than 100 basis points next year to 4.75%.
What might push the rate-setters to become more dovish are deteriorating economic growth prospects, which might extend the period of a negative output gap and limited overall wage growth, especially in the context of the improvement in labour productivity.
Additionally, Poland being placed under the European Commission’s excessive deficit procedure will also necessitate fiscal tightening.
These are significant elements that improve the medium-term inflation outlook in Poland, supporting a reduction in the restrictiveness of domestic monetary policy. That said, it remains unlikely that NBP interest rates will quickly reach a neutral level, let alone the central bank’s policy actually becoming accommodative.
Were the NBP not to cut rates at all in 2025, real interest rates will increase. Furthermore, the interest rate differential between Poland and major economies will widen, potentially contributing to the appreciation of the Polish zloty (PLN), hurting exporters and weighing down on economic growth.
7 Poland Outlook 2025 www.intellinews.com