Poland Special Report | Rate cuts on the horizon
CEE Economies Special Report , 5. Mai
The National Bank of Poland is anticipated to decide on the first target rate reduction after maintaining stability for nineteen months. During this period, the market consistently adjusted its rate path expectations upwards, and the tightening monetary conditions have provided significant support for the Polish zloty. However, as headline inflation consistently fell below NBP forecasts and wage growth and core inflation moderated, the case for a more relaxed monetary policy strengthened.
The initial indication of this incoming shift was evident in the April press statement, which had a noticeably different tone and sentiment compared to those released in the first quarter. Confirmation of the dovish pivot from the decision-makers was provided the following day during the Governor’s press conference. The primary message was readiness to significantly cut interest rates, potentially totaling up to 100 basis points over the next few meetings. The markets responded sharply to this news, with FRA rates decreasing and the zloty depreciating. In our assessment, the key rate is likely to be reduced by 100-125 basis points this year, while the FRA rates suggest a more aggressive monetary easing.
The initial indication of this incoming shift was evident in the April press statement, which had a noticeably different tone and sentiment compared to those released in the first quarter. Confirmation of the dovish pivot from the decision-makers was provided the following day during the Governor’s press conference. The primary message was readiness to significantly cut interest rates, potentially totaling up to 100 basis points over the next few meetings. The markets responded sharply to this news, with FRA rates decreasing and the zloty depreciating. In our assessment, the key rate is likely to be reduced by 100-125 basis points this year, while the FRA rates suggest a more aggressive monetary easing.