NBP holds reference rate at 3.75% despite higher 2027 inflation forecast

The decision

The reference rate stays at 3.75%, where the MPC left it in October after cutting rates earlier this year, The Armchair Trader reported. The decision matched market expectations. ING said the council repeated the final two paragraphs of its October statement unchanged, and that the list of risk factors was also unchanged, covering fiscal policy, regulated energy prices, the economic outlook and wage growth. The statement said future decisions would depend on incoming information on inflation and economic activity in Poland.

Higher inflation path

The NBP's November projection, reported by ING, raised the inflation path for 2026-28. With a 50% probability, annual CPI inflation was projected at around 3.2% in 2026, around 4.2% in 2027 and around 2.9% in 2028, compared with 2.9%, 2.7% and 2.2% in July. The 2027 figure is above the upper bound of the NBP's target range; FXStreet said the path returns to the band only in 2028. The NBP's GDP projection was broadly similar to July, with growth of around 3.7% projected for 2026, 2.9% for 2027 and 2.8% for 2028, against 3.7%, 2.8% and 3.0% in July.

Inflation and risks

Statistics Poland's preliminary estimate put September inflation at 4% year on year, the first time in 14 months it had moved outside the NBP's target range, xyz.pl reported. The NBP's target is 2.5% with a +/-1 percentage point band. ING said Glapiński emphasised that almost all the increase in inflation had come from higher fuel prices, with energy accounting for 60% of September inflation and limited pass-through to other prices. Corporate wage growth was running at around 6% year on year. ING said it saw no signs of broad-based pressure or second-round effects.

ING said the MPC noted data pointing to a decline in core inflation in October, while xyz.pl reported that available data suggested core inflation fell in September. Its estimate from preliminary October CPI data put core inflation excluding food and energy below 3% for the first time since March. President Karol Nawrocki signed windfall tax legislation on 1 October, enabling the government's Lower Fuel Prices scheme, including VAT and excise cuts, which took effect on 3 October, xyz.pl reported. ING said the cuts are expected to remain in place until the end of 2026. The MPC also noted a slowdown in GDP growth in the third quarter, with ING's forecast putting growth at 3.4% year on year, down from 4.1% in the second quarter.

Risks and the case for waiting

Glapiński said the draft 2027 budget envisages a general government deficit of 7.1% of GDP and does not provide for meaningful fiscal tightening, xyz.pl reported. He said the MPC stood ready to act if inflation risks continued to mount.

Wage growth is subdued, and higher fuel spending is weighing on households' real disposable incomes, ING said. The propensity to save remains elevated, which makes it harder for companies to raise prices. The bank concluded the MPC does not need to rush into hikes.

What next

ING said it did not share market expectations for the scale of rate hikes that had been priced in. The yield curve at one point priced 125bp of tightening and a first hike as early as November. Its baseline assumes no rate change through this year, with two 25bp increases possible in the first quarter of 2027 if the energy crisis continues and inflation stays elevated. ING said the latest projection supported that scenario.

The projection's cut-off date was mid-October, ING said. That captured inflation near its peak before the October decline that followed lower fuel taxes, and commodity prices near their highs before the post-election correction in oil and gas. The quarterly profile of the November projection is not yet public. ING expects it to show CPI declining around the turn of 2027-28 and returning towards the target.

ING said the next important development would be electricity and gas tariffs taking effect from the beginning of 2027, due to be announced in mid-December.