Commerzbank’s Antje Praefcke reports that the Polish central bank kept its key rate at 3.75%, while Governor Glapiński signalled no cuts until year-end after previously sounding dovish. With rate cuts now seen as unrealistic given higher inflation and geopolitical risks, the completed policy U-turn should underpin the Zloty, though future moves will depend on whether the council follows through with hikes if inflation rises further.

No cuts and conditional hike bias

“It was widely expected that the Polish Central Bank (NBP) would leave its key rate unchanged at 3.75% this week. More interesting was what Central Bank Governor Adam Glapiński would say about the future path of interest rates, given that he had sounded dovish in July, signaling rate cuts, but started to change his wording on the sidelines of the G2 summit in light of rising inflation rates.”

“At yesterday’s press conference, it became clear that there will be no interest rate cuts until the end of the year, even though decisions will be made on a meeting-by-meeting basis. Glapiński noted that inflation could exceed the target and that geopolitical uncertainty remains high. He acknowledged that he had been dovish as recently as this summer but that, given the escalation in the Middle East, rate cuts are now unrealistic.”

“This marks the completion of the U-turn, and interest rate cuts are off the table for now – a development that should provide underlying support for the zloty. Nevertheless, the question remains as to how the NBP will proceed in the coming months.”

“While Glapiński made it clear that the Monetary Policy Council would consider interest rate hikes if inflation and inflation forecasts rise, the same applies in reverse for rate cuts. In the coming months, it will therefore be important to see whether, should inflation continue to trend upward, Glapiński – or rather, the Monetary Policy Council – will actually stand by its word and be prepared to raise the key interest rate. This will be key for the zloty going forward.”