MNI NBP WATCH: Ref Rate Hold At 5.25% Expected, July In Focus

The National Bank of Poland is expected to leave the reference rate unchanged at 5.25% on Wednesday, with the result of July’s macroeconomic projections likely to determine the pace and timing of any future cuts. (See MNI EM NBP WATCH: 50BP Rate Cut In First NBP Easing Since 2023)

The Monetary Policy Council cut by 50 basis points in May, as inflation declined from 4.9% in March to 4.2% in April. May's 4.1% flash estimate would appear to confirm inflation’s downward trajectory, a trend further supported by cuts to regulated gas prices.

However, upside risks remain, with continued strong wage growth (+9.3%, up from +7.7% in March), an upside surprise to Q1 2025 GDP (+0.7%; 3.2% Y/Y), and evidence of a  further recovery in retail sales.

Governor Adam Glapinski and MPC members Ireneusz Dąbrowski and Iwona Duda have all indicated that the next cut is not likely until end-Q3 at the earliest, while Cezary Kochalski, Ludwik Kotecki, Przemysław Litwiniuk and Henryk Wnorowski have identified July as a key staging post in the easing cycle.

Even then, the NBP is expected to adopt a cautious approach as it fine tunes its monetary policy stance against a background of regional and global uncertainty. Instead a discussion of reserve requirements may be on this week's agenda, as suggested by the governor following last month's MPC meeting.