National Bank of Poland delivers 25bp cut

The National Bank in Poland surprised with 25 basis points interest rate cut on Wednesday. Most recent comments, including those central bankers who are considered dovish, suggested stability of rates in July. Geopolitical tensions that led to an increase in price of oil were most cited as a reason against interest rate cut in July. It seems, however, that despite these short-term risks, inflation in Poland is expected to ease. Quite visible downward revision of inflation in 2025 (by roughly 1 percentage point compared to the March projection) and less extensive revision in 2026 yet still to the downside were most likely behind such unexpected decision. Further, according to the central banks statement, CPI inflation in the coming months should all below the upper bound for deviations of the NBP inflation target supporting justification of monetary easing already in July. As for GDP growth, the revision to the downside was rather marginal but closer toward our expectations for economic growth in 2025 (3.2%). Slightly weaker growth dynamics adds to the view of easing inflationary pressures as well. All in all, we expect monetary easing to continue in autumn.