PL: No change from the MPC, first move expected in summer

The National Bank of Poland maintained stable interest rates following the February MPC meeting. The press release remained largely unchanged, reiterating the risks of inflation, which we believe are somewhat overestimated. We anticipate continued stability in interest rates until summer, with the first adjustment potentially occurring in July.

The press statement this month was only slightly modified to reflect the strong performance of the Polish economy in Q4 2024. However, it again emphasized 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 recent increases in energy prices, as well as rises in excise duties and administered services prices. Additionally, core inflation is likely to remain elevated. New inflation and growth forecasts will be published following next months meeting, where the projected inflation path would be the most interesting.

With the reference rate remaining unchanged, monetary conditions in Poland are becoming increasingly tight. The significantly positive ex-post and ex-ante real interest rates, along with the ongoing redemption of treasury bonds held by the NBP, will put increasing pressure on the economy in 2025. As markets have accepted that there will not be an interest rate cut in March or April, the EUR/PLN exchange rate strengthened towards the 4.20 threshold, which was briefly surpassed today. Governor Glapinski's press conference tomorrow will be closely watched by the market and analysts, who are waiting for guidance about the potential (re)-start of monetary easing. In our view, the first rate reduction will occur in July, with a total of 75 basis points worth of cuts expected by the end of the year.