Today the MPC decision on interest rates. Will low inflation cause a breakthrough?

A two-day meeting of the Monetary Policy Council (MPC) began on Tuesday. This afternoon we will learn the decision of the committee on the level of interest rates. Economists expect that they will once again be maintained at the same level.

Is there a chance for a reduction in interest rates?

– We do not expect a reduction in interest rates at the June meeting. Our long-term forecast assumes that NBP interest rates will remain unchanged throughout this and next year – Kamil Łuczkowski, an economist at Bank Pekao, told PAP.

The expert admitted, however, that the lower implementation of the inflation path in the first half of 2024 than expected by economists, but also by the central bank itself (slower increase in the inflation level – ed.) may trigger a greater discussion on possible interest rate cuts. Let us recall that according to preliminary data from the Central Statistical Office (GUS), consumer inflation amounted to 2.5 percent in May.

Currently, the main NBP interest rate, the reference rate, is 5.75%. and has been maintained at this level since October 2023. There was then a reduction in interest rates by 25 basis points. A month earlier, the Council surprised by cutting rates by as much as 75 basis points.

During the last press conference, the President of the National Bank of Poland and the Chairman of the Monetary Policy Council, Adam Glapiński, said that the process of reducing interest rates will begin when “inflation stabilizes at a level that we consider appropriate, consistent with the Monetary Policy Council's assumptions.” – We do not announce in advance what will happen. We act according to the incoming data – said the head of the central bank.

Answering journalists' questions on this matter, Glapiński estimated that such stabilization could occur at the beginning of 2025. – If at the beginning of 2025 we see that we are in the target range, or we will soon be in this target range, there will be such a discussion. Will it immediately result in a reduction in interest rates? It's hard to say, but there is a possibility – said the president of the National Bank of Poland.