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    Potential Interest Rate Cut by Poland’s Central Bank Amid Inflation Dip

    Estimated reading time: 2 minutes

    The Monetary Policy Council of Poland (RPP) is expected to announce a 25 basis point reduction in interest rates this Wednesday, following a significant drop in inflation. Grzegorz Ogonek, an economist at Santander Bank Polska, suggests that the central bank is likely to adhere to the rule that historically, sharp declines in inflation have led to interest rate cuts. In October, preliminary estimates from the Central Statistical Office (GUS) indicate that inflation fell to 6.5% from 8.2% in September.

    Possible Rule Changes

    Ogonek points out that while this rule has been followed in the past, RPP may reconsider its approach. He notes that RPP will have access to a new projection, allowing them to reevaluate their vision for returning to the inflation target and reassess risk balances. As a result, the previously applied rule may be subject to modification.

    Santander Bank Polska’s economists had initially projected that after the November interest rate cut, RPP might refrain from further cuts for about six months to gauge inflation trends. However, the outcome will depend on the assumptions made in the latest projection, such as the VAT on food and the extent of utility price freezes. Depending on these factors, inflation could either align with the target or significantly exceed it. Santander Bank Polska anticipates that inflation may average just over 6% next year, assuming a 40% increase in electricity bills starting in January and the reintroduction of VAT on food.

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