MNI NBP Review - July 2025: Inflation Forecast Triggers Cut

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Executive Summary

• The NBP delivered a surprise 25bp ‘cautious rate adjustment’ on a lower inflation forecast.
• Governor Glapiński signalled that there was potentially plenty of room for further easing.
• The Governor outlined four key risks to the inflation outlook that the MPC keeps an eye on.

The National Bank of Poland (NBP) wrong-footed the market by delivering a 25bp ‘cautious adjustment’ to its interest rates, bringing the reference rate to 5.00%. While dovish revisions to the triannual macroeconomic projection were widely anticipated, and it has become a common perception that the central bank could easily build a case for further monetary easing, recent communications persuaded most NBP watchers that the Council would rather wait until the end of summer before recommencing interest-rate cuts. On the contrary, a more benign inflation outlook was used to justify another rate adjustment, while the Governor guided that if the current baseline scenario materialises in data from the real economy, the central bank could ultimately bring the reference rate to the vicinity of the inflation target, potentially as low as to 3%.