First Central Bank Rate Cut in Poland Since 2020

September 6, 2023

The dollar today has strengthened 1.9% against the Polish zloty and shows a two-day 3.0% advance versus that currency, which was hurt by a greater-than-anticipated 75-basis point decrease in the National Bank of Poland‘s reference interest rate to 6.0%. During 2022, the central bank’s interest rate had been increased seven times and by a total of 500 basis points to 6.75% to counter accelerating inflation, which crested at 18.4% last February. Inflation retreated subsequently but remains problematic at 10.1% as of last month. An election scheduled for less than six weeks from today in which the conservative government is seeking a third term amid stagnating economic growth apparently added urgency to central bank officials wishing to help influence the outcome.

In the Council’s assessment, recently incoming data point to a weaker demand pressure than previously expected, which will contribute to a faster return of inflation to the NBP inflation target. Considering these circumstances – and taking into account the time lags in the monetary policy transmission to the economy – the Council adjusted NBP interest rates, which will be conducive to meeting the NBP inflation target in the medium term. The Council upheld the assessment that the decrease in inflation would be faster if supported by an appreciation of the zloty exchange rate.

Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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