MPC awaiting July inflation projection

Interest rates remain unchanged

Today, the Monetary Policy Council decided to keep interest rates unchanged, with the NBP reference rate remaining at 5.25%. The MPC’s decision was consistent with our forecast and the market consensus. Our forecast was supported by comments made by the NBP Governor at his press conference following the MPC meeting in May, where he stated that the 50-bp cut at that time did not mark the start of a monetary easing cycle and the likelihood of another rate cut in June was low. In the press release published after the meeting, the Council once again noted that “the outlook for global activity and inflation is subject to uncertainty, related, among others, to changes in trade policies”, referring to the potentially negative impact of the D. Trump administration’s tariff policy on global economic growth. The Council also reiterated its assessment that the future level of interest rates will depend on “incoming information regarding prospects for inflation and economic activity”. The Council also reinstated its assessment – removed from the May press release – that “the current level of the NBP interest rates is conducive to meeting the NBP inflation target in the medium term”. This suggests there is limited room for further rate cuts. As a result, we consider the tone of the June press release to be less dovish than in May.

Next rate cut set to come in July

The wording of the MPC’s press release is consistent with our scenario of continued monetary easing, most likely in July, when the Council reviews the latest inflation projection and moves forward with another 50bp cut. The July NBP projection will likely factor in the new gas price tariff approved by the Energy Regulatory Office in May, which should lower the short-term inflation path by about 0.3 pp. The July projection will also likely factor the change in fuel prices, which are lower than those assumed in the March projection. As a result, we expect the inflation rate forecasted in the projection to fall below 3% in Q3 2025, which would be a strong argument in favor of further monetary easing. However, we do rule out a scenario where the Council opts for a smaller cut (25bp in July), with another 25bp cut coming only in Q4. A. Glapiński’s press conference tomorrow should shed more light on the monetary policy outlook. We expect its tone to be mildly dovish.

In our opinion, the press release following today’s Council meeting is neutral for the PLN and yields on Polish bonds.