MPC cuts interest rates again

MPC cuts interest rates again

Today, the Monetary Policy Council decided to cut interest rates by 25bp, with the NBP reference rate now standing at 4.50%. The MPC’s decision ran counter to market expectations and our forecast, both of which pointed to a rate stabilisation. In the press release published after the meeting, the Council noted once again 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 noted that “taking into account an improved inflation outlook for the coming period, in the Council’s assessment, it became justified to adjust the level of the NBP interest rates”. 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 continues to believe that upside risk factors to inflation include “fiscal policy, consumption demand recovery and elevated wage growth”. Consequently, as in September, the tone of the October communication is varied and the MPC’s policy stance remains unclear.

Was this the last rate cut of 2025?

Today’s rate cut and the wording of the press release suggest the rate cut was driven mainly by September inflation coming in below expectations at 2.9% YoY (unchanged from August), as well as the adoption and presidential signing of the act freezing electricity prices in Q4 2025. In our opinion, however, today’s decision does not signal materially more room for further interest rate cuts in the coming quarters. It is quite likely that rates will remain at their current level through year-end. Supporting our scenario is the significant increase in district heating prices we expect in October, which would push the annual inflation rate higher. Furthermore, our view is consistent with recent remarks by some MPC members indicating that only one rate cut could be expected by the end of the year. A. Glapiński’s press conference tomorrow should shed more light on the monetary policy outlook. We expect the NBP Governor to tone down expectations for another rate cut in November.

Today’s decision by the MPC to cut rates and the press release following today’s Council meeting are, in our view, neutral for the PLN and yields on Polish bonds.