Central Bank leaves rates unchanged in June

Bank pauses easing cycle: At its meeting on 3–4 June, the Central Bank decided to keep the reference rate at 5.25%. The hold came on the back of May’s 50 basis point cut, the first reduction since October 2023.

Rates stable amid lower inflation and strong GDP growth: The Bank opted for a wait-and-see approach in May to assess the impact of its prior interest rate cut against a backdrop of surging trade uncertainty. Additionally, the Bank deemed that recently strong GDP growth could cause inflation to flare up. Finally, despite price pressures easing through May, the Bank anticipates higher electricity costs at year-end which, coupled with elevated wage growth, necessitated maintaining interest rates elevated to keep a lid on consumer prices.

Bank strikes a hawkish tone, but panel still expects interest rate cuts: The Central Bank’s president Glapinski struck a hawkish tone, signaling a potential delay to the start of the Bank’s monetary policy easing cycle. Still, our Consensus is for about 50 basis points of further rate cuts in Q3–Q4. Softer-than-expected inflation and GDP growth are downside risks to the policy rate. The Bank will reconvene on 1–2 July.

Panelist insight: ING’s Rafal Benecki and Adam Antoniak said: “The overall tone of the NBP governor's press conference was quite hawkish. […] Our previous baseline scenario, which assumed a 25 basis point cut in July and two more cuts in September and November, is now more uncertain. According to our forecasts, inflation will be within the NBP's target range by July, and we still consider the increase in electricity prices in the fourth quarter to be unlikely, given the price developments in the wholesale energy market. However, the NBP does not show a willingness to continue interest rate cuts soon.”

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