Interest Rates U-Turn: There's One Question

Adam Glapiński on interest rates TVN24

Members of the Monetary Policy Council suggest that interest rates could potentially be lowered as soon as May, according to some MPC members and economists from major banks. Following the National Bank of Poland President, Adam Glapiński’s conference on Thursday, the discussion has shifted from whether rates will be lowered to when it might occur.

During the press conference on Thursday, the NBP President hinted at the likelihood of interest rates being reduced in the near term. However, he clarified that this does not signify a commitment to initiate a series of rate cuts or a singular adjustment.

MPC members: rate cut possible as early as May

Cezary Kochalski, a member of the MPC, informed Bloomberg on Friday that the Council might contemplate a reduction in interest rates in May, potentially by 50 basis points. Furthermore, MPC member Ludwik Kotecki mentioned in an interview with TOK FM radio that it is highly plausible that the MPC will lower interest rates in May, stating, „A cut of 50 basis points is a possibility, with up to 100 basis points in 2025,” he assessed.

– It appears very likely (a May rate cut – ed.). The prevailing argument will be based on the March economic data. I believe the March figures will align more closely with the weak February data rather than the strong January data. (…) Consequently, I anticipate that the May Council will implement a rate reduction – Kotecki expressed.

When asked about the possibility of a 50bp rate cut in May, Kotecki affirmed that it is „on the table”.

Kotecki further noted that there is no necessity for the MPC to convene an extraordinary meeting in May, as the next scheduled MPC meeting is in early June. He emphasized that there are currently „quite a number of doves” within the MPC. – Doves are emerging from hawk eggs. They hatched this week – he added.

Economists also point to May

Economists at Santander Bank Polska predict that the first interest rate reduction could occur as early as May.

Analysts noted that the NBP president commenced the conference by indicating that the MPC had shifted to a dovish stance. They highlighted that Adam Glapiński mentioned the potential for cutting interest rates soon, but the MPC requires more data to proceed.

„The MPC may opt to lower rates if the subsequent data set also demonstrates weakness, which we interpret as an indication that May could be the time for the initial move. Glapiński added that he prefers to adjust rates rather than initiate a cycle, suggesting he would like a reduction of 25 bp or 50 bp, depending on the data. He envisioned two 50 bp cuts followed by a pause and another move later this year,” noted Santander analysts. They stressed that after the NBP conference, it remains possible that the first step towards a rate cut could happen in May, though this is heavily contingent on forthcoming data.

Read more: „We may see the first reductions in installments as early as April”. Calculations >>>

NBP President „changed attitude”

Economists from ING Bank Śląski also anticipate the initial interest rate reduction in May.

The Monetary Policy Council is exhibiting a „dovish” stance following a notable improvement in the inflation outlook, as indicated in their commentary. „The NBP President has aligned with other MPC members, transitioning from a strongly hawkish to a dovish position within a few weeks,” remarked Rafał Benecki, Mateusz Sutowicz, and Leszek Kąsek from ING.

They observed that the Monetary Policy Council has considerably softened its position after a clear enhancement in the inflation outlook. „We have little doubt that a reduction will occur in May, likely by 50 basis points, with a total reduction of at least 100 basis points anticipated in 2025,” the economists stated.

Nevertheless, experts pointed out that the NBP president was vague regarding future actions. „Firstly, he indicated that there should be no cycle (of interest rate cuts), and secondly, that the target rate is 3.5 percent in 2026. In our view, we can expect two mini-cycles in 2025 and 2026,” they noted.

Economists at Bank Pekao also discussed potential scenarios on social media. „The primary message from the NBP president during today's (Thursday – ed.) conference is: 'The MPC has shifted to a more dovish stance.’ There are also newly lowered inflation projections. We interpret this as laying the groundwork for interest rate reductions,” the bank’s commentary on the X platform stated.

„We do not recall any previous instance where the President of the National Bank of Poland, A. Glapiński, made such a clear announcement about future steps, namely two 50 bp cuts, a few months’ pause, and then another cut. The statement suggested that this sequence might commence as soon as May,” they added.

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Glapiński on interest rates

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