The MPC puts it on hold. Duda on risks for inflation: Loose fiscal policy and energy prices

Room for further interest rate cuts. is getting smaller, and in discussions about the next moment for such a move, March appears, although everything will ultimately depend on the data – says MPC member Iwona Duda. The economist sees room to reduce the NBP reference rate to 3.75-3.50%.

“Currently, monetary policy is heading towards easing. If the incoming data are good and confirm the current forecasts, favorable for inflation, i.e. permanent stabilization of the CPI in the broadly understood NBP objective, further adjustment moves will be justified. After the recent large reductions in interest rates, by a total of 175 basis points, however, in my opinion, we should wait a while with further decisions. The Monetary Policy Council must give itself time to observe and analyze the situation. Especially since the beginning of the year is ahead of us, in which various regulatory decisions are made. Price lists are changed, administrative fees are rising, we will have new energy prices. Therefore, in my opinion, January will not be the moment to change the monetary policy parameters. We need to see what inflation impulses will appear at the beginning of the year,” Duda wrote in her statement.

“March appears quite often in discussions as a possible moment for cuts. Then we will have a new projection, taking into account previous changes in monetary policy parameters and the latest economic data. Although no scenario can be ruled out, and the Council will react appropriately to emerging data, from meeting to meeting,” she added.

In Duda's opinion, caution in the MPC's actions is still advisable, and the space for further rate cuts is getting smaller.

“Hence, in my opinion, we are talking about small reductions and the target range is 3.50-3.75% in the case of the main target rate,” she added.

The MPC member added that discussions within the MPC are not about setting the target level of rates, but about making decisions that will stabilize prices at a level consistent with the inflation target within the monetary policy horizon.

Duda estimates that the prospects for inflation in Poland are good, but risks to price processes still persist. In her opinion, these are primarily: loose fiscal policy, strong recovery in demand in the economy, wage dynamics and energy prices.

In December, the Monetary Policy Council reduced all NBP interest rates by 25 basis points, including the reference rate to 4.00%.

This was the fifth consecutive reduction in NBP rates and the sixth in the whole of 2025. Earlier in 2025, the Monetary Policy Council reduced rates in November, October, September, July (25 bps each; there is no decision-making meeting in August) and May this year. by 50 bp. In total, throughout 2025, the Monetary Policy Council reduced the cost of money by 175 basis points. (PAP Business)

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