The market currently prices in a total 50 basis point reduction in interest rates for this year. Investors do not expect a rate cut in June, and it would not be a surprise if the decision is postponed a bit longer.
“Rate cuts could extend throughout the year, roughly every three months—in July, September, and December. This scenario is also possible,” said Michał Stajniak, Deputy Director of the Analysis Department at XTB, in an interview with MarketNews24. “This would result in rates being 75 basis points lower in total.”
Within the Monetary Policy Council (RPP), there is also a faction that prefers to wait longer, particularly until the situation around electricity prices becomes clearer. This group targets the first rate cut in September, which would be a 50 basis point reduction.
“In that case, rate cuts would occur in September and December, and we would see an acceleration of rate reductions starting early next year,” added the XTB expert.
Economic Data Under Review
Analysis continues of incoming economic data. After adjusting for seasonal factors, real retail sales increased by 3.5% in April compared to March, reaching a record high. Nominal retail sales growth in companies employing more than 9 people was 7.9% year-on-year, up from 0.6% in March, significantly exceeding the market consensus of 3.9%. Real retail sales growth climbed to 7.6% year-on-year in April, compared to -0.3% in March, beating the consensus forecast of 3.4%.
Strong growth persisted in sales of durable goods categories. Sales data suggest that the slowdown in consumer demand in upcoming quarters may be less pronounced than expected.
Nominal wage growth rose to 9.3% year-on-year in April, up from 7.7% in March, well above the market consensus of 8.1%. In real terms, wage growth accelerated to 4.8% year-on-year, the highest since December 2024. The real wage fund’s growth rate increased to 4.0% year-on-year (compared to 1.8% in March).
Wage Growth Raises Uncertainty
“Wages in September turned out to be a ‘sticking point’—this wage reading increases uncertainty about the timing and size of rate cuts,” commented Stajniak.
“For this reason, July rather than June may be a better time to announce a rate reduction.”
The market currently prices in the likelihood of one rate cut within three months, possibly even two cuts this year, but totaling around 50 basis points.
Source: managerplus.pl
