PL: MPC keeps the interest rates stable

In the first MPC meeting of the year, there were no surprises as the key policy rate was maintained at 5.75%. The press release following the meeting adopted a rather hawkish tone, indicating among others the risk of further unfreezing of energy prices in the second half of 2025. We will closely monitor tomorrows press conference by the Governor, as it may provide some clarity on the uncertain trajectory of monetary policy.

With two months remaining until the new round of predictions from the NBP, the observed inflation path is currently below the central line prediction from November. Nevertheless, today's press release highlighted several inflationary risks: energy prices, food prices, fiscal policy, wages, services, and core inflation are all areas of concern for the MPC. According to council members, inflation is expected to remain significantly above the NBP's target in the coming quarters, driven by the effects of recent increases in energy prices, as well as rises in excise duties and administered services prices. Furthermore, core inflation is also likely to remain elevated.

The release further mentions that in the medium term, under the current NBP interest rate levels and amid the anticipated gradual decline in wage growth, inflation should return to the NBP target. However, considering the annualized month-on-month average inflation since July, the figure already stands at approximately 2.5%. The press release to us suggests that the majority of MPC members are not yet convinced that inflation is under control, which could delay the easing cycle. Our baseline forecast anticipates a 25 basis point cut in April, followed by an additional 75 basis point reduction by the end of the year.