NBP stays patient as inflation risks build

The National Bank of Poland kept its reference rate unchanged at 3.75% in October, in line with expectations and extending the pause in place since March.

Governor Adam Glapiński’s press conference reinforced the case for patience. While inflation has moved above the NBP’s target band, policymakers still view the increase primarily as an energy shock and see little evidence that higher fuel and gas prices are spreading through the wider economy.

September CPI rose to 4.0% YoY, but Glapiński stressed that preliminary data point to lower inflation excluding food and energy, while headline inflation could return to the NBP’s 2.5% ±1pp target range in October.

Crucially, he said there are currently no signs of second-round effects. That distinction is central to the outlook: an energy-driven rise in headline CPI alone is unlikely to trigger higher rates, but evidence that the shock is becoming embedded in wages, services or broader pricing behaviour would materially change the calculation.

Even so, the risks are becoming less benign. Glapiński highlighted strong domestic demand, improving external activity, rising global agricultural prices, loose fiscal policy and accelerating producer prices as factors that could make inflation more persistent.

He also stressed uncertainty around government fuel-tax policy, with current VAT and excise-duty cuts temporary and their extension into January still unclear.

November therefore matters, but it is not yet a base-case hiking meeting. Glapiński said he does not expect a rate increase next month, although he would not rule one out, and stressed that the Council is ready to act if inflation broadens and proves persistent. For PLN, that leaves the message mildly supportive: the NBP is not signalling imminent tightening, but the balance of risks around the next move has shifted towards higher rather than lower rates. Our view is therefore that 3.75% is likely to remain in place for longer, with any eventual tightening dependent on the November projection, the January fuel-tax decision and evidence of second-round effects.

Author:

Barry van der Laan MBA, Senior FX Market Strategist

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