NBP remains comfortably on hold
The National Bank of Poland left interest rates unchanged in July, keeping the reference rate at 3.75%.
The decision was expected and confirms that the Monetary Policy Council is not in a hurry to restart the easing cycle, despite the recent improvement in headline inflation.
This decision reinforces our view that the NBP is in a holding phase. Inflation has cooled enough to remove any realistic case for renewed rate hikes, but not enough to justify an immediate shift towards cuts.
The central bank can afford to wait for clearer evidence that inflation is sustainably back around target, rather than reacting too quickly to the latest inflation relief.
The June CPI data clearly improved the policy backdrop. Headline inflation fell to 2.5% y/y, exactly in line with the NBP’s target, while prices declined by 0.5% on the month. This confirms that recent energy-driven inflation pressure has eased more quickly than initially feared. The pass-through from oil prices into broader price pressures has also appeared more contained than expected.
Still, the disinflation story is not yet strong enough to make the Council confident.
Part of the recent decline reflects normalising energy prices and softer food-price dynamics, both of which can be volatile. Core inflation remains closer to 3%, and the expiry of fiscal measures on limited petrol and diesel prices could push fuel prices higher again. The Middle East situation also remains a source of uncertainty, even if the immediate inflation impact has so far been limited.
This is why the NBP’s caution makes sense. The policy rate is restrictive enough to keep inflation expectations anchored, while the economy does not yet require urgent monetary support.
That gives the Council room to assess whether the latest fall in inflation is durable, especially on the core CPI side.
Governor Adam Glapiński’s press conference on Thursday will therefore be important. He may acknowledge the improvement in inflation and could sound somewhat softer than in previous months. However, we do not expect him to validate near-term rate-cut expectations. In our view, the cut debate may return after the summer, but the Council is likely to require several more months of favourable inflation data before moving.
In short, the NBP has no reason to tighten and no urgent reason to cut. Softer inflation has bought policymakers time, not a green light for easing. The central bank remains comfortable keeping rates unchanged.