Interest rates in Poland. MPC decision on Wednesday

At the last meeting in November, the Monetary Policy Council decided to leave rates at the current level. The NBP reference rate is still 5.75%.

The last time the Monetary Policy Council decided to reduction of interest rates in October 2023. Then interest rates were reduced by 0.25 points. percent According to economists, the Monetary Policy Council will not reduce interest rates at the December meeting and the first reduction is possible only after March 2025.

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– We do not expect a reduction in interest rates. The majority of MPC members made it clear what conditions were necessary for a reduction in interest rates. And these conditions are not yet met, Kryńska said.

According to the statements of the President of the NBP, Adam Glapiński, to reduce interest rates it is necessary to achieve: inflation peak and then starting the process of reducing it with the prospect of reducing the price growth rate to the level of the inflation target, i.e. 2.5 percent. +/- 1 point percent

– Inflation will reach its peak only at the end of the first quarter and will start to decline. A new inflation projection will also appear in March, showing this decline. However, in our opinion, there will be no decision on the reduction in March. We expect the first reduction only in Mayand in total throughout 2025, rates will drop by 100 points. base rates, which means there will be a total of four reductions – said a PKO BP economist.

In her opinion, the government's decisions to maintain the freezing rules energy prices for 9 months of 2025 will increase the chances of interest rate cuts from May.

– If prices were not frozen, the situation would be more complicated because we would be dealing with an increase in inflation. Freezing means that at the beginning of the year we will see a stabilization of this indicator – said Urszula Kryńska.

In turn, mBank economists expect the cycle of interest rate cuts in Poland to begin by 50 basis points. in the first quarter of 2025 and estimate that by the end of 2025 the reference rate will drop to 4%.

“During his speech in November, President Glapiński presented two arguments to start the cycle of monetary policy easing. Firstly, inflation must stop rising. Secondly, within a few quarters (in the new projection) we must see inflation within the target. The second of these conditions was basically met in November, when the new projection showed inflation within the target over an 8-quarter horizon. We believe that in March this horizon will be shortened and at the same time inflation will pass its local peak. For this reason, we expect the cycle of rate cuts to begin with a move of 50 bp. (in Q1 2025 – ed.) (kind of catching up with other central banks), and then gradual cuts towards 4%. at the end of the year,” mBank wrote in the report.

According to mBank experts, the economic situation this year turned out to be weaker than the original assumptions, which over time began to have an increasing impact on the policy pursued by the Monetary Policy Council.

“In such a situation, the space for a significant (further) acceleration of the momentum of core inflation growth is disappearing. At the same time, the current situation on the labor market also signals that the period of high salary increases is definitely behind us. In the coming quarters, we expect a rapid deceleration in wage growth, which will also translate into lower increases in unit labor costs (labor efficiency should remain relatively high, around 4%). The latest NBP projection also goes in this direction,” the report indicates.

Even if energy prices were not frozen in 2025, in the opinion of mBank experts, higher energy prices in the environment of summer domestic demand should have an additional cooling effect on core inflation.

Additionally, the fact that the ability of the corporate sector to maintain high margins has decreased, according to mBank, which is evidenced by the decomposition of the deflator GDP and the decreasing component of individual profits of companies. In the context of the exchange rate, according to mBank, this factor will not play any role from the point of view of the Monetary Policy Council.

“We expect only a moderate depreciation of the zloty. Moreover, a slight depreciation may be perceived positively by the Monetary Policy Council due to some compensation for the weakness of foreign demand. Please note that the fragment about the zloty appreciation consistent with the fundamentals of the economy has already disappeared from the Monetary Policy Council's statement,” it added.