The Monetary Policy Council has decided to maintain the interest rate at its current level, given the uncertain global economic situation. In the Eurozone, the economic growth dynamics in the third quarter have declined and are approaching zero, while in Germany, they are even negative. In the United States, however, the economic growth dynamics in the same period have increased and exceeded the long-term average.
Despite the decline in inflation in many economies, the annual price dynamics in most countries remain elevated. The drop in commodity prices and the easing of tensions in global supply chains have contributed to reducing cost pressures, which is reflected in the decline in production prices in many economies. Although core inflation remains at an elevated level, it is gradually decreasing.
In Poland, despite the low dynamics of economic activity, indicators point to a gradual increase. In September 2023, there was a decline in retail sales and industrial production on an annual basis, but to a lesser extent than in previous months. The dynamics of construction and assembly production, however, increased. The labor market remains stable with low unemployment, although the growth in employment in the enterprise sector has slowed down.
According to a quick estimate by the Central Statistical Office (GUS), the annual CPI inflation rate in October 2023 significantly dropped to 6.5% compared to 8.2% in September. This decrease is due to lower energy prices and food and non-alcoholic beverages. Projections of inflation and GDP from the NECMOD model anticipate further changes in these indicators in the coming years, with inflation being in the range of 11.3 – 11.5% in 2023, 3.2 – 6.2% in 2024, and 2.2 – 5.3% in 2025. The pace of GDP growth will also be stabilized.
The Council assessed that the low demand and cost pressure in the Polish economy, combined with weakened economic conditions and decreasing inflationary pressure abroad, will contribute to a gradual decline in domestic inflation. Considering the uncertainty of future fiscal and regulatory policy and its impact on inflation, the Council decided to keep interest rates at the current level. Further decisions will depend on incoming information regarding inflation and economic activity prospects.
The NBP has committed to undertaking all necessary actions to ensure the country’s macroeconomic and financial stability, including returning inflation to the NBP’s medium-term inflation target. Interventions in the foreign exchange market remain a possibility if needed.
