Poland's central bank held its main rate at 3.75% on November 4, even though it raised its 2027 inflation forecast to 4.2% from 2.7%. The energy shock is the core of the revision. The Monetary Policy Council (MPC) of the National Bank of Poland (NBP) said its future decisions “will depend on incoming information concerning the outlook for inflation and economic activity in Poland”.
The new projection places 2027 inflation in a 3.1%-5.3% range with 50% probability, compared with 1.5%-4% in July, according to bne IntelliNews. At 3.75%, the policy rate would sit about half a percentage point below the inflation the NBP itself expects next year. The midpoint of that range is above the top of the 1.5%-3.5% band around the bank's 2.5% target. bne IntelliNews describes the hold as a bet that the energy shock fades on its own, while the zloty, which trades near three-year lows, would carry any misjudgement into import prices.
The projection's mid-October cut-off caught inflation near its peak. Lower fuel taxes then helped bring it down to 3.5% year-on-year in October from 4.1% in September, and oil and gas prices fell back after the US midterm elections, according to ING. The quarterly inflation path has not yet been published, but ING expects it to show inflation falling around the turn of 2027-28.
ING economists Rafal Benecki and Adam Antoniak expect hikes totalling 50 basis points, none before the first quarter of 2027, according to a note published on November 4. Markets had priced more aggressively, with the yield curve at one point pricing 125 basis points of tightening and a first hike in November. ING treats the shock as pure supply.
Energy-linked prices are rising, but wider pressures and second-round effects have not appeared. Wage growth is slowing, fuel bills are eating into household incomes, and households are still saving, which makes it harder for companies to pass on costs. ING estimates that core inflation excluding food and energy fell below 3% in October for the first time since March, and that GDP growth eased to 3.4% year-on-year in the third quarter of 2026 from 4.1% in the second quarter. “The MPC does not need to rush into interest rate hikes and can continue to monitor developments in energy markets and their impact on the domestic economy,” the ING note said.
ING identifies three risks that could still force a move early next year. The first is a longer energy crisis spreading into wider prices. The second is large rises in regulated household prices in the new year, with gas above all.
The third is tighter policy at the Federal Reserve and the European Central Bank pushing the zloty lower, although ING notes that exchange-rate pass-through to Polish inflation is limited. The fuel tax relief runs only until December 31, so its expiry is a key date for household energy costs. A hike could also slip later into the first quarter of 2027 because three MPC members have been named to the NBP's board and must be replaced.
Other banks sit on either side of ING's call. PKO BP sees no need for any increase if inflation goes temporarily above 4% in early 2027 and drops below 3.5% in the second half, as it expects. Commerzbank strategist Tatha Ghose, writing before the decision, called October's fall a “temporary tax intervention, not genuine disinflation” and said that “NBP's inaction risks pushing Polish monetary policy behind the curve”.
The zloty is absorbing much of the strain. According to Raiffeisen Research's FX Watch note of November 4, EUR/PLN rose above 4.42 at the start of November, its highest in three years, before falling back below 4.40 on November 4 as global sentiment improved. Raiffeisen calls the zloty “the weak link of the region”.
According to ECB reference rates, the euro has gained 4.4% against the zloty since January 2. Raiffeisen says its 2027 path for the pair is “increasingly subject to upside risks”. ING's currency team said in its FX Daily note of November 4 that its outlook for the zloty “remains bearish due to the NBP's dovish stance”.
Fiscal and political pressures add to the currency risk. Moody's cut Poland to 'A3' from 'A2' on September 18, forecasting a general government deficit of around 7% of GDP in both 2026 and 2027 and debt rising to 68.9% of GDP in 2027 from 59.7% in 2025. Raiffeisen analyst Dorota Strauch wrote that “domestic risks are no longer confined to the deteriorating fiscal outlook, which contributed to Moody's rating downgrade, but increasingly extend to politics and institutional tensions”.
She expects more such episodes ahead of the parliamentary elections in autumn 2027, with little prospect of fiscal repair before the vote. Raiffeisen sees monetary policy as the main counterweight. It says the forecast revision “materially increases the risk of rate hikes over the coming months”, which could support the zloty or at least limit its fall, although about three hikes were already priced in before the decision.
The Czech National Bank was widely expected to raise its rate on November 5. NBP Governor Adam Glapinski was due to explain the decision at a press conference on November 5, and the full inflation report is due on November 6. ING's case for waiting depends on the quarterly path showing inflation falling back towards target within the policy horizon.
Source: intellinews.com