Poland’s Monetary Policy Council (RPP) left interest rates unchanged in September, but a hike has not been ruled out. Council member Ludwik Kotecki told Bloomberg the panel may need to move if inflation looks set to stay above 4 percent.
The September decision was in line with market expectations. Members of the rate-setting body say they are watching price growth closely and are prepared to step in if it exceeds the National Bank of Poland’s target of 2.5 percent, which comes with a tolerance band of plus or minus one percentage point.
– If the projection shows that inflation will most likely stay consistently above 4 percent, the Council will have to consider raising rates still this year or at the beginning of next year – one or two moves of 25 basis points – said Ludwik Kotecki, a member of the Monetary Policy Council.
Such a decision would be the first of its kind in more than four years. The last increase came on 8 September 2022, when the Council lifted the main reference rate to 6.75 percent.
Stability first, cuts off the table
Kotecki stressed that the immediate priority is to hold rates at their present level. Only if that proves insufficient to tame price growth would the Council reach for increases.
– Rate cuts are out of the question for now – the RPP member said.
Inflation is inching toward the edge of the target
Consumer inflation in Poland reached 3.4 percent in August, rising 0.3 percentage points from July’s reading, according to data from Statistics Poland (GUS). The figure sits close to the upper limit allowed by the central bank’s target.
Core inflation, which strips out food and energy prices, stood at 3.3 percent in August against 3.1 percent a month earlier. Price pressure originating in the hydrocarbons market is spilling beyond that sector into the wider economy, giving the current cost wave a more lasting character rather than a temporary one.
Despite the acceleration, the Council did not change the level of NBP rates at the start of the month. The reference rate remains at its lowest level since September 2023.
Commodity markets are adding to the strain. Oil prices have been trading between 90 and 105 dollars per barrel for several weeks, while natural gas costs 70 to 75 dollars per MWh. In June the two commodities were priced at roughly 75 dollars a barrel and 40.4 dollars per MWh respectively.
Coal- and gas-fired power plants ran at high output during the summer, drawing down stocks of hard coal and gas in storage. Fuel for heating is now in short supply, and what is available carries a steep price.
Source: WNP.pl, Phot. NBP/Flickr (press materials)
