After a two-day meeting, Poland’s Monetary Policy Council will announce its decision today on the level of interest rates. In March, the Council decided to cut rates. Will it opt for another change this time? The market is almost unanimous in assuming that the May meeting will end with no change in interest rates, meaning that the NBP reference rate will remain at 3.75%, emphasises Tomasz Gessner, Chief Analyst at Tavex.
The flash estimate published by Statistics Poland on 29 April showed that consumer inflation in April stood at 3.2% year on year, exceeding analysts’ expectations and the March reading of 3%. Worryingly, the increase occurred despite existing excise tax relief on fuels, while fuel prices were as much as 8.4% higher year on year. The indicator is clearly moving away from the NBP’s 2.5% target, giving the Council a strong argument for a pause. Any easing of interest rate policy would be difficult to justify in this environment.
Geopolitics adds another layer of uncertainty. The ongoing conflict in the Middle East and tensions around the Strait of Hormuz are creating risks for global energy prices, and Poland is particularly sensitive in this respect. Allianz Trade analysts estimate that the potential inflationary impulse from a blockade of this route would be twice as strong in Poland as, for example, in Czechia. The NBP President himself mentioned this risk during the April press conference, pointing to geopolitical tensions as one of the key factors shaping the price outlook.
Foreign central banks are sending similar signals. The European Central Bank refrained from changing interest rates at the end of April, keeping the deposit rate at 2%, while the Federal Reserve maintained its range at 3.50–3.75%. However, the upcoming change at the head of the Federal Reserve is gaining particular importance, as Jerome Powell is set to hand over the helm to Kevin Warsh, Donald Trump’s nominee, on 15 May. Warsh has announced simultaneous interest rate cuts and a reduction of the Fed’s balance sheet, raising questions about the coherence of this strategy and its impact on the global bond market. For Poland’s Monetary Policy Council, this is an additional element of uncertainty supporting a wait-and-see approach.
The zloty remains relatively stable, which supports a calm tone at the meeting. In the background, it is worth noting the NBP’s decision to purchase more than 11 tonnes of gold in March, continuing the accumulation seen in February, when it bought more than 20 tonnes. Over the entire first quarter, reserves increased by nearly 49 tonnes, exceeding 582 tonnes in total. This is a clear signal that the central bank is building a financial safety buffer amid geopolitical and currency uncertainty.
The May meeting is not expected to surprise markets, and the next signals regarding a possible change in direction should be looked for no earlier than the NBP’s July inflation projection.
Source: CEO.com.pl
