The National Bank of Poland (NBP) has repeatedly warned of upside risks to inflation over the medium term, but this has not prevented the central bank from cutting rates as inflation moderates. Rate-setters have cut rates at each policy meeting since July, and we expect another 25bp cut on 5 November
The decline in headline inflation to 2.8% YoY in August and further easing of core inflation would likely allow policymakers to cut rates by 25bp in September, but highly expansionary fiscal policy is expected to prompt a cautious approach ahead. Rate setters may pause in October and return to the rate cut discussion in November
Polish headline inflation has been confirmed at 3.1% YoY in July, from 4.1% YoY in June, as the effect of the partial unfreeze of energy prices in mid-2024 died out. With inflation within the tolerance band of the National Bank of Poland's target (2.5%, +/- 1ppt), the central bank now has room to continue its monetary easing cycle
