Poland's Central Bank Cuts Rates as Expected Ahead of Election

By Ed Frankl

Poland's central bank on Wednesday cut interest rates as expected at its final meeting ahead of national election later this month.

The National Bank of Poland cut its key reference rate by 25 basis points to 5.75%, in line with expectations of economists polled by FactSet.

It came after the NBP shocked markets last month by slashing its key rate by 75 basis points at its previous meeting, a decision that sent the zloty tumbling. At that point, the reference rate had been held at 6.75% for a year.

Some analysts have argued that efforts to bring interest rates down could benefit Poland's ruling Law and Justice party ahead of the election, due on Oct. 15.

Inflation in September was 8.2%, which, while much stronger than the central bank's target of 1.5%-3.5%, marked the first time inflation had sank to single digits since February 2022.

The sharper-than-expected decline in headline inflation likely helped tip the balance toward a cut, according to Capital Economics economist Nicholas Farr in a note.

However, there remain risks that policymakers might be acting prematurely in bringing rates down so quickly, with inflation far from the NBP's target, as well as a tight labor market and an economy that is starting to show signs of a recovery, he added.

Write to Ed Frankl at [e-mail]

(END) Dow Jones Newswires

10-04-23 1005ET