The June meeting of Poland’s Monetary Policy Council will take place at a time when expectations for further interest rate cuts have clearly weakened. While only a few months ago the market was pricing in a continuation of monetary policy easing, current macroeconomic data and the global environment now point rather to caution.
Inflation remains the key factor. After previously falling close to the National Bank of Poland’s inflation target, there are signs that the pace of disinflation may be slowing. Core inflation is particularly important, as it reflects the persistence of price pressure in the economy, especially in services. From the perspective of the Monetary Policy Council, this means the need to remain cautious and avoid lowering the cost of money too quickly.
At the same time, Poland’s economic situation remains relatively stable. Private consumption is holding up at a solid level, the labour market is not showing signs of a sharp deterioration, and economic activity does not point to a severe slowdown requiring urgent monetary stimulus. This limits the pressure for further rate cuts as early as June.
IRS rates are also an important signal for assessing the Council’s future decisions, as they reflect market expectations regarding the future level of interest rates. Recently, these rates have been rising, which may be interpreted as a decline in investors’ confidence in a rapid continuation of rate cuts. The market has started to assume a more cautious path for monetary policy, and even the possibility that current interest rate levels may be maintained for longer.
Another risk factor is the geopolitical situation, particularly tensions surrounding Iran. Higher oil and energy prices could once again increase transport and production costs in the coming months, making it more difficult for inflation to continue falling. For the central bank, this is an argument in favour of greater caution when making decisions.
What decision can be expected?
The most likely scenario for the June meeting appears to be keeping interest rates unchanged. The Monetary Policy Council may conclude that it needs more time to assess the impact of previous decisions and to determine whether inflation will indeed remain under control despite growing external risks.
Another rate cut later in the year cannot be ruled out entirely. In June, however, a wait-and-see strategy combined with cautious communication seems more likely than another downward move.
Disclaimer: The information contained in this publication is for informational purposes only. It does not constitute financial advice or any other form of advice, is general in nature and is not addressed to any specific recipient. Before using this information for any purpose, independent advice should be sought.
Source: CEO.com.pl
