Today, the Monetary Policy Council decided to cut interest rates by 50bp, with the NBP reference rate now standing at 5.25%. The MPC’s decision was consistent with our forecast and the market consensus. Our forecast was supported by comments from the NBP Governor and other MPC members after the April meeting, which signalled room for monetary policy easing, as well as a sharper-than-expected decline in inflation to 4.2% YoY in April (see MACROmap of 05/05/2025). 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 reiterated its assessment that the future level of interest rates will depend on “incoming information regarding prospects for inflation and economic activity”.
A more dovish tone than in April
The tone of the MPC’s press release after the May meeting is more dovish than in April. The Council noted that “taking into account incoming information, including lower current and forecasted inflation, decreasing wage growth and weaker data on economic activity, in the Council’s assessment, the adjustment of the level of the NBP interest rates became justified”. At the same time, the Council removed the assessment presented last month 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” and that “the current level of the NBP interest rates is conducive to meeting the NBP inflation target in the medium term”. This signals that the Council sees further room for easing monetary policy in the coming months.
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. This scenario is supported by our short-term inflation forecast, which projects that in Q3 inflation will continue to fall sharply to 3.2%, while the NBP’s July projection will once again outline the prospects of inflation returning to the MPC’s target in 2026. However, we do not rule out the possibility that the Council might continue cutting rates in both June and July, although at a reduced pace of 25bp. We stand by our forecast that the MPC will lower interest rates by a total of 100bp in 2025. We also continue to expect limited growth in energy prices in the coming quarters, which is why we anticipate a strong drop in inflation in H2 2025 and a return to the inflation target in Q3 2026. A. Glapiński’s press conference tomorrow should shed more light on the monetary policy outlook. We expect it to maintain a dovish tone.
In our opinion, the press release following today’s meeting of the Council will be neutral for the PLN and yields on Polish bonds.
