Inflation is low. Why didn't the Monetary Policy Council lower interest rates?

The two-day meeting of the Monetary Policy Council ended with the decision to maintain interest rates at the current level – regardless of the fact that inflation is within the inflation target. The most important interest rate (reference rate) is 5.75%.

Interest rates unchanged

– Interest rates have remained unchanged and will most likely remain so until the end of this year. Of course, there are some indications that may open up a discussion about price cuts later this year. GDP data for the first quarter were mixed, and although they were ultimately revised upwards, after the latest disastrous PMI reading, it can be expected that the economic recovery in Poland will not be as strong as previously expected. A weaker economy also means potentially less pressure on price increases – comments Michał Stajniak, deputy director of the XTB Analysis Department.

He adds that inflation is low (2.5%), but there is a fear that it will increase after energy price increases. This is not the only factor that could have prompted the Council to decide to leave the status quo.

– The second important factor is wages, which have been growing at a double-digit rate for over two years. Therefore, members of the Monetary Policy Council have strong grounds to continue voting for keeping interest rates unchanged, even if the economy sends signals of weakness. Looking at the recent statements of MPC members, we have clear confirmation of the desire to keep interest rates unchanged this year, says Stajniak.

We will learn more about the reasons behind the MPC's decision on Thursday at the traditional monthly conference of the Chairman of the Council, Adam Glapiński. It will start at 3 p.m. and will be broadcast on the NBP website and on some television news stations. We will also report on its progress.