Interest rates remain unchanged
Today, the Monetary Policy Council has decided to keep interest rates unchanged, with the NBP reference rate standing at 5.75%. The MPC’s decision was consistent with the market consensus and our forecast. In the press release published after the meeting, the Council noted once again that “the outlook for economic activity and inflation around the world is fraught with uncertainty, which is related to, among others, changes in trade policies”, thus making a reference to the growing protectionism around the world caused primarily by the D. Trump administration’s tariff policy. The Council also repeated its assessment regarding the future level of interest rates, which “will depend on incoming information regarding prospects for inflation and economic activity”.
Markedly less hawkish overtones comparing to March
The press release is markedly less hawkish than in March. The Council has noted that “in the coming months inflation will remain above the NBP inflation target, driven by the effects of the already introduced increases in energy prices, as well as by the rises in excise duties and administered services prices” (cf. March press release saying that inflation would be “markedly above the NBP inflation target”), and “in the second half of 2025 – in line with the present legal arrangements and accounting for the current level of tariffs for electricity – there will be a further rise in regulated energy prices” (in March, the Council expected “further unfreezing of energy prices in the second half of 2025”). Furthermore, the Council emphasised that “incoming information, including lower than expected Statistics Poland data on inflation in the first months of 2025, signal that inflation in subsequent quarters may be lower than previously expected”.
Current and anticipated inflation drop to create room for interest rate cuts
The wording of the press release published after the MPC meeting is consistent with our scenario of interest rate stabilisation in the coming months, which is also underpinned by our near-term inflation forecast in which inflation is to drop from 4.9% YoY in Q1 to 4.4% in Q2, which means it will stay markedly above the upper limit for admissible deviations from the inflation target (2.5% +/- 1 pp.). We expect inflation to markedly drop once again in Q3 (to 3.2%), while the NBP’s July projection will once again outline the prospects of inflation returning to the MPC target in 2026. Our expectations are strongly underpinned by a lower starting point for the July 2025 projection (inflation in Q1 was markedly lower than assumed in the March projection). Consequently, we have made no adjustments to our forecast in which the MPC is to cut the interest rates twice in 2025 (in Q3 and Q4, by 50bp in total). We also adhere to our previously expressed opinion saying that energy prices will rise only in Q1 2026, and not as much as the NBP predicts, and this is the reason why we anticipate inflation to drop strongly in H2 2025 and return to the inflation target in Q3 2026. Tomorrow’s press conference by A. Glapiński will probably offer more clarity about the monetary policy outlook. We anticipate that it will be slightly hawkish.
In our opinion, the press release following today’s meeting of the Council is slightly negative for the PLN and yields on Polish bonds.
