The National Bank of Poland’s key interest rate, the reference rate, has been decreased by 25 basis points to 5.75%. This is the second consecutive decrease (following a 75 basis point reduction in September). The previous cut was a surprise for financial markets, as evidenced by the zloty weakening by about 10% against the dollar and about 4% against the euro over the last month. Today’s decision by the Monetary Policy Council will maintain this weakening, and may even increase it. The inflationary effects of this weakening will be apparent in the coming months as the prices of imported goods, which make up more than half of Poland’s total GDP, are set to increase.
As per Central Statistical Office data, politically motivated fuel prices have brought down the average price of this product by 7%. After the elections on October 15th, Orlen, Poland’s largest oil company, will have to return to market-based fuel prices. Therefore, a significant inflation increase in Q1 2024 seems inevitable, from the current level of about 8% to likely around 10%.
Stanisław Gomułka – Chief Economist of Business Centre Club
