Biznes Fakty
Interest rates. What will the MPC and NBP do? „Excellent conditions” for lowering interest rates
Analysts at Pekao suggest that we are approaching „excellent conditions” for a reduction in interest rates. Meanwhile, Goldman Sachs analysts anticipate that the Monetary Policy Council will restart the process of monetary policy relaxation in the third quarter of this year.
„In May 2025, consumer goods and services prices rose by 4.1 percent year-on-year, and decreased by 0.2 percent in comparison to the previous month,” reported the Central Statistical Office in a preliminary estimation on Friday. In reaction to the CSO data, economists from Bank Pekao noted that this month-on-month price drop in May marks the first such decline since September 2023.
Inflation and interest rates
„We predict that core inflation (the most commonly referenced figure, excluding energy and food prices) has taken another slight downward movement, falling to 3.3 percent year-on-year in May. The influence of elevated labor costs on service prices is gradually diminishing. The momentum for core price increases has also entered a downward trajectory, and on an annual basis, already points towards a rate near the NBP’s inflation goal,” commented analysts from Pekao.
They also mentioned that food and non-alcoholic beverage prices increased in May compared to the previous month by 0.4 percent. They assessed that food remains one of the few categories that unfortunately may see price rises in the upcoming months.
When will rates drop?
Bank economists are of the opinion that inflation will hover around 4% during the second quarter. At the start of the second half of the year, a significant drop in inflation is expected, clearly falling below 3%, primarily due to base effects.
„CPI inflation is very likely to reach the direct inflation target (2.5%) as soon as in the third quarter of this year, remaining close to that figure until the year’s end,” believe Pekao economists.
They noted that the return to the inflation target would occur sooner than previously anticipated, as they had initially expected it to take place only in the first half of next year. They remarked that core inflation would decrease at a much slower rate.
„(…) these are excellent macroeconomic conditions for reducing interest rates: a projected acceleration in GDP growth and a decline in inflation to levels aligned with the inflation target. We predict that in July, along with the new NBP inflation forecast, the Monetary Policy Council will lower interest rates by at least 25 basis points. We expect further reductions later in the year,” stated economists from Bank Pekao.
Goldman Sachs on interest rates
Goldman Sachs analysts Kevin Daly and Vinayak Iyer mentioned in a commentary that NBP President Adam Glapiński „effectively indicated that interest rates would remain unchanged at the June meeting.”
However, they foresee that the Monetary Policy Council will recommence the easing of monetary policy in the third quarter of this year – most likely in July.
They also predict that the Council „will implement further interest rate reductions totaling 100 basis points in the latter half of this year.” They believe that, considering the strong base effect of energy prices, inflation will fall below the NBP target (2.5% +/- 1 percentage point) by July this year.
They emphasized that the preliminary reading included only a partial breakdown of the data but noted that the decrease in inflation „was primarily due to lower fuel price inflation” and, as their estimates suggest, „a further decline in core inflation.”
„The drop in oil prices resulted in deflation in the transport fuel category from -8.3% y/y in April to -11.4% y/y this month. In other categories, food inflation slightly increased from 5.3% y/y to 5.5% y/y, while energy inflation remained stable at 13.1% y/y,” noted Daly and Iyer.
The largest banks in Poland
PKO BP stands as the largest bank in Poland, boasting approximately 12 million customers and assets valued at over PLN 500 billion. Following PKO BP in the ranking of the largest banks by assets are Pekao, Santander, ING, and mBank.
