NBP Policy Stance Keeps Polish Zloty Under Pressure

Key Moments

Focus on NBP Decision and Communication

Commerzbank strategist Tatha Ghose expects Poland’s central bank to maintain its base interest rate at 3.75%, despite what he identifies as persistent underlying inflation risks that are being obscured by temporary government fuel tax measures. He argues that these administrative steps should not influence the central bank’s policy stance and cautions that the National Bank of Poland’s reluctance to act could leave Polish monetary policy lagging, with the Zloty likely to remain weak.

“Poland’s National Bank (NBP) will announce its November monetary policy decision this afternoon: the analyst consensus nearly unanimously forecasts that the base rate will remain unchanged at 3.75%. As usual, tomorrow’s press conference and new NBP projections will hold more interest than today’s rate decision itself.”

Inflation Data Distorted by Fuel Tax Cuts

Ghose highlights that the perceived weakness in consumer price inflation in October has played a key role in delaying further rate hikes, a reaction he considers misplaced.

“Nevertheless, it is worth pointing out that October’s apparent CPI weakness was responsible for delaying rate hikes. But, it should not. Headline inflation slowed to 3.5%y/y from 4.1%y/y in September, but this slowdown occurred only because of well-known administrative fuel-price adjustments (the government lowered VAT on fuel to 8% from 23% and reduced excise duties to EU minimum levels; passenger fuel prices consequently fell by 9.7%m/m). Such a development is temporary tax intervention, not genuine disinflation.”

Underlying Pressures and Policy Risks

According to Ghose, the central bank should concentrate on underlying inflation dynamics and not on the effects of temporary government actions on fuel prices.

“Monetary policy should ignore such administrative intervention and target the preceding acceleration to above-target underlying inflation. Raw energy and commodity-price pressures remain elevated, the labour market is still tight, and the fuel support is currently scheduled to expire at year-end. The upcoming inflation projections may clarify some scenarios, but cannot resolve uncertainty surrounding future government interventions, regulated tariffs or political developments.”

He concludes that the current stance of the NBP may carry significant risks for the currency.

“In our view, NBP’s inaction risks pushing Polish monetary policy behind the curve; the zloty will, therefore, remain under pressure.”

Key Data Points Referenced