Another interest rate cut
Today, the Monetary Policy Council decided to cut interest rates by 25bp, with the NBP reference rate now standing at 4.00%. The MPC’s decision was consistent with market expectations and our forecast. The wording of the press release published after the meeting was only slightly modified. The Council again pointed out that “the outlook for global activity and inflation remains uncertain”, although this time the direct reference to “changes in trade policies” was removed. Similarly to November, the Council also stressed that “taking into account inflation developments and its outlook for the subsequent quarters, in the Council’s assessment, it became justified to adjust the level of the NBP interest rates”. The MPC also reiterated its assessment that the future level of interest rates will depend on “incoming information regarding prospects for inflation and economic activity”. Once again, the Council pointed to three main risk factors to low inflation: “fiscal policy, recovery of demand in the economy as well as developments in wage growth”. It is worth noting that, compared with the November statement, the word “elevated” was removed in relation to wage growth. Similar changes, which softened the overall tone of the press release, included deleting the reference to core inflation in the Eurozone, which had been described as “somewhat higher” than headline inflation, and to “elevated” core inflation in the US, even though the latest macroeconomic data did not really support such changes. In our view, similarly to November, the tone of the press release following the Council’s December meeting is ambiguous, and the MPC’s policy stance remains unclear.
The end of the monetary easing cycle is drawing nearer
The wording of today’s post-meeting press release suggests that the main arguments for the MPC’s monetary easing were the flash November inflation reading coming in below expectations (2.4% YoY vs. a market consensus of 2.7%) and the slowdown in wage growth in October. In our view, room for further rate cuts over the coming quarters is limited. This is confirmed by our medium-term inflation forecast, under which price growth, driven by low base effects for food and fuel prices, will rise above 3% YoY in Q4 2026. We believe that the NBP reference rate level consistent with macroeconomic balance is 3.75%. Accordingly, we expect one more, and final, 25bp cut in Q1 2026. Our scenario is supported by our expectation that inflation will fall to a local minimum of 2.1% YoY in February 2026. A. Glapiński’s press conference tomorrow should shed more light on the monetary policy outlook. We expect the NPB Governor to tone down expectations for further rate cuts.
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.
