Interest rates remain unchanged
The Monetary Policy Council decided today to keep NBP interest rates unchanged, with the reference rate remaining at 3.75%. The MPC’s decision was consistent with both our forecast and market expectations. In its post-meeting press release, the Council stressed that “prices of some agricultural commodities are rising gradually” and that “amidst tense geopolitical situation the outlook for global activity and inflation worsened and continues to be subject to uncertainty”. The MPC also noted that the decline in inflation from 3.2% YoY in April to 3.1% YoY in May, according to Statistics Poland’s (GUS) flash estimate, was driven mainly by a fall in food price growth. The Council again stressed that the outlook for inflation and economic activity in Poland is currently affected by “changes in macroeconomic situation abroad, including changes in global commodity prices and inflation, amid geopolitical context”. It also reiterated the main risk factors for the inflation outlook, namely “fiscal policy and regulation concerning fuel prices as well as changes in growth of activity in the Polish economy and further developments in wage growth”. The MPC also maintained that “uncertainty regarding future developments in geopolitical situation and their impact on the economy” is the key argument for keeping interest rates unchanged.
Interest rates still most likely to remain unchanged
The wording of the MPC’s post-meeting statement supports our scenario in which NBP interest rates remain at their current level until the end of 2027. This scenario is strongly supported by the flash estimate of May inflation, which was significantly below our forecast of 3.7%. The surprising fall in inflation in May points to a downside risk to our expected short-term inflation path. Under this path, inflation is expected to remain above the upper limit for deviations from the MPC’s inflation target of 2.5% +/- 1 pp in the coming quarters, despite our assumption that the fuel-market intervention mechanism (reduced VAT and excise duty, as well as a price cap) will remain in place until February 2027. The fall in inflation in May also suggests that the risk of a one-off, “signalling” interest-rate hike in H2 2026 has decreased markedly. Such a hike would aim to more firmly anchor inflation expectations among households and companies, thereby helping to reduce wage pressure and limit the risk of secondary inflationary impulses, i.e. second-round effects. We will present our revised inflation forecast in the upcoming MACROmap. A. Glapiński’s press conference tomorrow should shed more light on the monetary policy outlook.
Today’s MPC decision to keep interest rates unchanged, as well as the tone of the post-meeting press release, are – in our opinion – neutral for the PLN exchange rate and yields on Polish bonds.
