Poland’s central bank has decided to keep its benchmark interest rate unchanged as inflation remains above its target, with several economic factors continuing to pose risks to price stability.
The National Bank of Poland (NBP) kept its key interest rate steady at 5.75% during its January meeting, in line with market expectations. This rate has remained constant since October 2023.
This move aligns with the NBP’s ongoing cautious stance, which was reinforced during December’s meeting. Adam Glapiński, the president of the National Bank of Poland, had stated last month, “The central bank may not slash interest rates until the end of this year.” The decision is largely driven by persistent inflationary pressures and the ongoing strength of the US dollar, bolstered by the hawkish policies of the US Federal Reserve. Additionally, the expiration of energy price caps in 2025 is expected to drive inflation higher, making it less likely for the central bank to reduce interest rates in the near term.
The Euro/Polish zloty exchange rate rose by 0.18%, reaching 4.26 ahead of the central bank’s decision.
Poland’s inflation rate for December 2024 held steady at 4.7%, the same as in November, according to the Central Statistical Office of Poland (GUS), slightly under preliminary estimates of 4.8%. Price increases in non-alcoholic beverages and food remained at 4.8%, and communication costs were unchanged at 4.1%. Meanwhile, transport costs declined at a slower rate, falling by -3.3% in December, compared to -4.1% in November.
The prices of tobacco and alcoholic beverages also saw a smaller increase, growing at 3.3% in December, down from 3.9% the month before. The costs for culture and recreation also dropped to 5.5%, compared to 6.1% in November.
However, utility and housing costs rose at a faster pace, reaching 10.1% in December, up from 9.9% in November, and health-related expenses inched up to 5.5% from 5.3% in the previous month.
