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Dovish NBP skating on thin ice after bumper rate cut

The decision by the National Bank of Poland (NBP) to kick off its easing cycle this week with a much larger-than-expected 75bp interest rate cut has been heavily criticised, and suggests to us that policymakers are underestimating the challenge of bringing inflation sustainably back to target. The central bank won’t be able to get away with similarly aggressive rate cuts in the coming months, without pushing up rate expectations further along the curve.

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