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Monetary Policy Council to Maintain Interest Rates at 5.75% in Poland

ECONOMYMonetary Policy Council to Maintain Interest Rates at 5.75% in Poland

The Monetary Policy Council (MPC) is set to make its first interest rate decision of the year, and like many previous decisions, expectations are clear that the interest rates will remain unchanged at 5.75%, according to Tomasz Gessner, chief analyst at Tavex.

December statements by the president of the National Bank of Poland (NBP) leave little room for speculation, and expectations for any potential rate cuts have been pushed back to at least the third quarter. Even better-than-expected preliminary consumer inflation data for December, released on January 3, won’t change this outlook. Inflation was expected to rise from 4.7% to 5%, but it actually increased to 4.8%.

The MPC’s rhetoric may also be influenced by changes in expectations for the pace of rate cuts across the Atlantic, which began in September. Although there have already been three rate cuts in the USA totaling 100 basis points, market appetite last September was much greater. The Federal Reserve’s own forecasts suggest a maximum of two rate cuts in the United States this year, but market sentiment is even more skeptical, currently only allowing for the possibility of one 25 basis point cut, optimally at the June meeting.

This, in turn, means that the Monetary Policy Council does not need to rush with lowering the cost of money. Were it to do so, surprising investors, it would accelerate the recent weakening of the Polish złoty, which, by increasing the prices of imported goods, would contribute to already rising inflation.

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