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Monetary Policy Council to meet on interest rates
The Monetary Policy Council is set to convene on Tuesday to deliberate on interest rates. The outcome will be disclosed on Wednesday. Economists are in consensus. Based on market forecasts, the Monetary Policy Council is anticipated to reduce interest rates by 50 basis points. This would be favorable news for certain borrowers, as a decrease in the NBP rate leads to lower installments.
The two-day session of the Monetary Policy Council commences on Tuesday. Presently, the NBP main interest rate, which is the reference rate, stands at 5.75%. The Council has upheld this rate since October 2023.
While the Monetary Policy Council did not modify interest rates in April, NBP President Adam Glapiński suggested the possibility of a reduction in the near future during a post-meeting conference. He estimated that this could occur in May, June, or July. He stressed that this should not be viewed as a series of cuts but rather as a singular adjustment to combat rising inflation.
– You could humorously say that I lead a flock of doves. The Council is shifting to a more dovish stance, meaning it anticipates a change towards lowering interest rates – remarked Glapiński.
He also did not dismiss the possibility that if positive data continues, including a slowdown in wage growth, he would propose a motion to reduce interest rates. He indicated that, in an optimistic scenario, there could be two rate reductions this year, each by 0.5 percentage points.
NBP reference rate PAP/Michał CzernekThe Minister of Finance expresses satisfaction
Previously, the NBP president had consistently argued that, among other factors, heightened inflation left no room for adjusting interest rates. He emphasized that amid the ongoing economic recovery, rapid wage growth, and an expansive fiscal policy, the Monetary Policy Council must navigate monetary policy to prevent inflation from becoming entrenched at elevated levels.
In response to Glapiński’s suggestion, Finance Minister Andrzej Domański expressed his approval of the NBP president’s „dovish shift.”
– We understand the implications of lower interest rates; they facilitate investments. Reduced rates benefit the economy and are advantageous for households repaying loans or considering new ones (…) – stated Andrzej Domański.
Predictions from economists
Economists at Santander Bank believe that at the upcoming meeting of the Monetary Policy Council, they will „likely transition from discussions to actions concerning the resumption of interest rate cuts.” „We anticipate the Monetary Policy Council will promptly lower rates by 50 basis points and convey that this is not necessarily the beginning of a prolonged series of actions. From the comments following the April decision, it was inferred that the May cut is almost certain, and its magnitude would be dictated by the data. These (including further wage deceleration) appeared to favor a more substantial move,” wrote Santander representatives.
According to ING economists, the Monetary Policy Council is expected to relax monetary policy in May. „We foresee a 50 basis point cut in May and a total of 125 basis points throughout the year,” they noted in a commentary on April’s inflation data.
PKO BP analysts also predict the first interest rate cut in May. „The ongoing disinflation, positive inflation outlook, and weak economic performance in Q1 2025 are, in our view, critical factors for reducing interest rates at the May meeting, likely by 50 basis points,” they stated in a commentary following the inflation data.
Bank Pekao economists share a similar outlook on the likelihood of interest rate reductions. „April’s inflation, combined with rather weak indicators from the Polish real economy (industry, retail sales, construction) will provide sufficient rationale for the MPC to cut rates at the May meeting, likely by 50 basis points,” Pekao experts commented.
Positive news for borrowers
The financial market is not awaiting a formal reduction; it is already factoring it in, including declining WIBOR rates, which serve as the basis for interest on variable-rate loans.
– This is encouraging news, especially for borrowers. Individuals with variable interest rate mortgages will experience an actual decrease in installments as soon as the repayment schedules are updated. This not only relieves household budgets but may also serve as an impetus that positively influences demand and purchasing choices in the upcoming months – assessed Andrzej Łukaszewski from Credipass.
According to Tomasz Tondera, EY-Parthenon partner, cuts in interest rates by the Monetary Policy Council could enhance the accessibility of financing and liquidity in the real estate sector. Lower debt service costs will boost project profitability and help align buyer and seller expectations.
– The anticipated interest rate reductions by the Polish Monetary Policy Council could represent a significant turning point for the housing market. They will undoubtedly enhance household creditworthiness
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