Today, the Monetary Policy Council decided to cut interest rates by 25bp, with the NBP reference rate now standing at 5.00%. The MPC’s decision was consistent with our forecast but went against the market consensus, which had 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 observed that “according to the available forecasts the CPI inflation in the coming months will fall below the upper bound for deviations of the NBP inflation target”, which, in the Council’s view, justified the adjustment of 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”. However, the Council removed the assertion that “the current level of the NBP interest rates is conducive to meeting the NBP inflation target in the medium term”. This suggests that the easing cycle will continue.
NBP projection forecasts lower inflation in 2025-2027
In accordance with the NBP’s July projection, which is based on the assumption that the NBP would not change interest rates and on data covering the period up to 9 June 2025, there is a 50% probability that the annual price growth will be in the range of 3.5-4.4% in 2025 (vs. 4.1-5.7% in the March 2025 projection), 1.7-4.5% in 2026 (vs. 2.0-4.8%) and 0.9-3.8% in 2027 (vs. 1.1-3.9%). Consequently, the inflation path for 2025-2027 has been revised downwards from the March projection. The downward revision in inflation for 2025-2026 was driven by a lower starting point (with Q2 inflation coming in below expectations), lower forecasted fuel prices and a sharp drop in natural gas prices in July. Thus, starting from Q3 2025 through the end of 2027, inflation in the projection falls within the acceptable deviation band around the inflation target (2.5% +/- 1 pp), with inflation expected to return close to the inflation target in H2 2026 (the NBP will present detailed projection data this Friday). Meanwhile, according to the projection, GDP growth with 50% probability will be in the range of 2.9-4.3% in 2025 (vs. 2.9 – 4.6% in the March 2025 projection), 2.1-4.1% in 2026 (vs. 1.9-4.0%) and 1.3-3.7% in 2027 (vs. 1.1-3.5%). The projected GDP growth path, which indicates a slowdown in 2026-2027, is fairly aligned with the path from the March projection. Moreover, the outlined scenario for GDP growth in 2025-2026 is consistent with our forecast (see MACROmap of 30/06/2025).
Projection results suggest further room for rate cutsWe believe the tone of the July press release is slightly more dovish than in June. In our opinion, the results of the July projection signal room for further interest rate cuts in the coming quarters. We expect that due to uncertainty surrounding fiscal policy in 2026 and elevated core inflation, the Council will put monetary easing on hold until November 2025 when, following the release of the November projection, it will move forward with another 25bp cut. A. Glapiński’s press conference tomorrow should shed more light on the monetary policy outlook. We expect its tone to be mildly dovish.
Today’s MPC decision to cut interest rates and the tone of the press release following the meeting is negative for the PLN and yields on Polish bonds.
