National Bank of Poland holds as inflation risks point to a Q1 hike
The National Bank of Poland kept its reference rate at 3.75% in November, matching our expectations and consensus, while Governor Adam Glapiński’s press conference signalled a shift towards tightening.
He described the Council as becoming more hawkish as risks to next year’s inflation increase, stressing that policymakers would act promptly if needed. This reinforces our expectation of a hike in Q1 2027. His observation that Polish rate changes do not typically occur in December lends some support to that timing, although it leaves an earlier move possible. For the zloty, the firmer guidance should offer some support amid continued political uncertainty.
October’s decline in headline inflation from 4.1% to 3.5% YoY explains why the Council could afford to hold.
Glapiński confirmed that core inflation also eased and highlighted moderate wage growth, increasingly cautious household spending and limited evidence that higher fuel costs are spreading to other prices. He expects economic growth to slow further next year, helping contain domestic inflation pressure. Nevertheless, the Council sees a risk of inflation accelerating again as commodity costs and the expiry of temporary price measures feed through. Food prices add another source of uncertainty.
The November projection makes the importance of government policy clear. Assuming unchanged interest rates and no fuel price cap in 2027, the NBP projects inflation rising to around 4.6% in the first half of next year.
Maintaining fuel support would contain that increase nearer 3.7%, according to the alternative scenario presented at the press conference. Extending support would therefore reduce the urgency to tighten, while prolonging its fiscal cost. We continue to expect a Q1 hike as persistent energy pressures and expiring support raise inflation risks, although a durable decline in commodity prices or continued weakness in underlying inflation could delay action.
Glapiński left open whether tightening would involve a single hike or a cycle, making the scale of any response dependent on how those risks develop. Although Glapiński expressed little concern about the zloty, we see sustained depreciation as a potential additional inflation risk through higher import costs.
This could amplify the domestic cost of dollar-priced energy if the currency weakens against the USD. His description of good cooperation with the government offers a more conciliatory tone, but uncertainty over his position remains. We therefore see the hawkish shift as cushioning the zloty, with a sustained recovery against the euro also dependent on political developments and the energy outlook.
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