Interest rates remain unchanged
Today, the Monetary Policy Council has decided to keep interest rates unchanged, with the NBP reference rate remaining at 5.75%. The MPC’s decision was consistent with the market consensus and our forecast. The post-meeting press release maintained a slightly hawkish tone. The Council noted that inflation in major developed economies remains slightly above central banks’ targets and maintained its assessment that “in the coming quarters, inflation will remain markedly above the NBP inflation target, driven by the effects of the already introduced increases in energy prices, as well as rises in excise duties and administered services prices”.The press release also reaffirmed that “at the same time, core inflation will probably also continue to be elevated”.The Council reiterated that “in the medium term – under the current NBP interest rates level and amid the expected gradual decline in wage growth – inflation should return to the NBP target”. The MPC once again listed the uncertainty factors underlying this scenario: the unfreezing of energy prices in H2 2025, the impact of elevated inflation on inflation expectations and wage pressures, especially amid the expected economic recovery and low unemployment. Moreover, the Council highlighted the uncertainty concerning the economic activity outlook in major economies attributable to “possible changes in global trade policies”. 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”.
Interest rates to remain stable until July
The wording of the press release published after the MPC meeting is consistent with our scenario of interest rate stabilisation in the coming months. This scenario is also supported by our revised short-term inflation forecast, which predicts that the growth rate of prices will remain close to 5% YoY until June 2025. We stand by our forecast that the first rate cut should be expected in Q3 2025, i.e. in the period when inflation will go down substantially due to the high base effect and print somewhere around 3.5%, which is the upper limit for deviations from the MPC inflation target (2.5% +/- 1 pp.). We believe a key argument for a rate cut in Q3 will be the results of NBP’s July inflation projection, in which, despite a temporary inflation increase between Q4 2025 and Q3 2026 due to the unfreezing of energy prices anticipated by the NBP, inflation will return to the MPC’s target in Q4 2026. This scenario will likely be outlined already in NBP’s March projection. However, in our opinion, given the still-elevated current inflation level, the MPC will not opt for a rate cut in Q2. Tomorrow’s press conference by A. Glapiński will probably offer more clarity about the monetary policy outlook. We expect its tone to be hawkish.
In our assessment, the press release following today’s meeting of the Council will be neutral for the PLN and yields on bonds.
