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Interest rates in Poland. The MPC's decision at the May meeting regarding the level of interest rates
On Wednesday, the Monetary Policy Council will reveal its decision regarding interest rates. Most economists anticipate a reduction in rates. NBP President Adam Glapiński has also hinted at a potential decrease in the near future.
The two-day session of the Monetary Policy Council commenced on Tuesday. Currently, the primary interest rate set by the NBP, the reference rate, stands at 5.75%. This rate has been unchanged since October 2023.
NBP reference rate PAP/Michał CzernekAnnouncement of interest rate reductions
Even though the MPC did not alter interest rates during its last meeting in April, Adam Glapiński, the President of the National Bank of Poland, suggested that a reduction could occur soon. Following the Council’s meeting, he assessed that this might happen in May, June, or July. According to the NBP head, this should not be seen as a series of cuts, but rather a singular adjustment aimed at reducing inflation. He mentioned that in an optimistic scenario, there could be two reductions this year, each by 0.5 percentage points.
Previously, the NBP president maintained that, among other factors, rising inflation left no room for interest rate changes. He noted that amid ongoing economic recovery, rapid wage increases, and a lenient fiscal policy, the MPC must implement monetary policy in a way that prevents inflation from remaining elevated.
Adam Glapiński on interest rates TVN24Potential interest rate reductions
Following Adam Glapiński’s conference in April, discussions surrounding the possibility of interest rate reductions accelerated significantly. Numerous MPC members also voiced their agreement with the market’s expectation that a rate cut will occur in May.
As April progressed, statements from the Monetary Policy Council increasingly suggested that a decrease in the cost of borrowing would begin in May. This was linked to additional macroeconomic data that confirmed a disinflationary trend within the Polish economy.
The most robust declaration regarding potential rate cuts came from MPC member Przemysław Litwiniuk. He believes that conditions will be ripe for a 50 basis point reduction in May, and he will propose it himself if no one else does. He also mentioned that another reduction could happen in the fall, also by 50 basis points.
Xelion analyst Piotr Kuczyński predicts a potential reduction of the reference rate by either 25 or 50 basis points, though he expressed a preference for the latter.
Expected decrease in mortgage rates
Piotr Kuczyński highlighted that lower NBP interest rates will naturally lead to decreased credit costs. He believes that mortgage payments could decrease by several dozen to over a hundred zlotys for a loan amounting to PLN 300,000. However, he noted that this change would not be immediate, occurring after 3 to 6 months, depending on whether the loan is tied to a 3-month or 6-month WIBOR.
The increased attractiveness of mortgage loans post-rate cut was emphasized by Jacek Furga, chairman of the Committee for Financing and Real Estate at the Polish Bank Association. He calculated that with a 50 basis point rate reduction, a borrower with an average loan of PLN 500,000 would see a decrease of over PLN 200.
– This represents a tangible amount of savings, and I believe it would serve as a significant incentive, with each subsequent reduction making loans even more appealing – underscored the ZB expert.
