Interest rates unchanged
The Monetary Policy Council (MPC) decided today to keep the NBP interest rates unchanged, including the reference rate at 3.75%. The MPC's decision was in line with our forecast. Compared with October, the tone of the press release remained broadly unchanged. The Council reiterated that "the outlook for global activity and inflation is subject to uncertainty, stemming, in particular, from the conflict in the Middle East". The Council also maintained its assessment that "further decisions of the Council will depend on incoming information regarding prospects for inflation and economic activity in Poland". It was again emphasised that "particularly important is macroeconomic situation abroad, including developments in global commodity prices and inflation, amid changing geopolitical context". The list of main risk factors for the inflation outlook also remained unchanged. As stated in the press release, "the shape of fiscal policy, regulatory decisions regarding energy prices, changes in activity growth of the Polish economy and further developments in wage growth also remain risk factors for inflation outlook".
NBP projection points to markedly higher inflation in 2027
According to the November NBP projection – prepared under the assumption of unchanged NBP interest rates and taking into account data available until 15 October 2026 – there is a 50-percent probability that annual price growth will be in the range of 3.1–3.2% in 2026 (against 2.4–3.3% in the July 2026 projection), 3.1–5.3% in 2027 (compared to 1.5–4.0%) and 1.4–4.4% in 2028 (compared to 0.8–3.9%). This represents a marked upward revision to projected inflation, particularly in 2027. The midpoint of the 50-percent probability range for inflation was raised significantly for 2027 (by 1.45pp) and, to a lesser extent, also for 2028 (by 0.55pp). The projection therefore points to a risk that inflation will remain above the upper bound of the NBP's inflation target tolerance band (2.5% ± 1pp) for a substantial part of 2027. At the same time, the annual GDP growth – according to the projection – will be with a 50-percent probability in the range of 3.2–4.1% in 2026 (against 3.0–4.4% in the July 2026 projection), 1.9–3.8% in 2027 (compared to 1.8–3.7%) and 1.7–3.9% in 2028 (compared to 1.9–4.1%). Thus, the projected economic growth path has not changed significantly compared with the July projection.
A January interest rate hike remains our baseline scenario
In our view, the results of the November NBP projection support our scenario of a 25bp interest rate hike in January 2027. The marked upward revision to projected inflation in 2027, accompanied by only minor changes in the GDP growth outlook, indicates that the risk of second-round inflationary effects stemming from high energy commodity prices persists. At the same time, despite the marked deterioration in the inflation outlook in the November projection, the post-meeting press release contained no new wording signalling an increased willingness on the part of the Council to tighten monetary policy. This suggests that the Council continues to favour a cautious approach to interest rate adjustments and will want to assess the persistence of the rise in inflation, particularly the extent to which it feeds through to core inflation.
We therefore maintain our scenario in which the MPC will keep interest rates unchanged in December before raising the reference rate by 25bp to 4.00% in January 2027. However, we see a risk that this hike will ultimately not materialise. Factors supporting this assessment include the decline in inflation in October to the upper bound of the NBP's inflation target tolerance band, signs of easing core inflation and the resumption of government intervention in the fuel market, which may be extended into part of next year. NBP President A. Glapiński's press conference will take place tomorrow and is likely to shed more light on the monetary policy outlook. Of particular importance will be the NBP President's stance on the marked upward revision to the inflation path in the November projection and his assessment of whether the projected persistence of inflation above the upper bound of the inflation target tolerance band in 2027 signals a high probability of monetary policy tightening.
In our view, today's MPC decision to keep interest rates unchanged and the content of the post-meeting press release, including the results of the November NBP projection, are neutral for the zloty exchange rate and yields on Polish government bonds.
