Central European Daily

At its October meeting, the National Bank of Poland (NBP) again eased its monetary policy, after a 15-month break, and cut rates quite rapidly. The rate cut by 50 basis points surprised most of the market, evidence of which is the immediate reaction of the zloty, which weakened. The main reason for the rate cut is the low inflation rate and the deteriorating prospects for maintaining the fast rate of economic growth. The NBP believes that these prospects are increasing the risk of inflation remaining below the target (2.5%) even in the medium term. Let us add that October’s rate cut may not necessarily mark the end of the monetary easing cycle. The NBP leaves the door open in this regard, albeit President Belka’s comments on this at the press conference were rather cautious. Nevertheless, we believe that the above-mentioned economic factors will not wane, with another downside risk to inflation being posed by the ECB policy, at least in the short term. Hence we currently expect a rate cut by 25 bps even at the November meeting.