Central Bank leaves rates unchanged in April

Bank extends pause further: At its meeting on 1–2 April, the Central Bank decided to keep the reference rate at 5.75%. April’s decision marked the 17th consecutive hold, in line with market expectations.

Bank remains on hold amid high inflation and a sluggish economy: The Bank ruled out a cut as inflation remained above the 1.5–3.5% target in Q1, even though price pressures came in below the Bank’s expectations. Meanwhile, a hike was also off the table as the Bank expects disappointing economic activity growth in Q1 amid declines in retail sales, industrial output and construction.

Imminent rate cuts on the horizon, but fewer than previously expected: The Bank restated its mandate to bring inflation back to target and mentioned the possibility of intervening in the foreign exchange market. Meanwhile, Governor Adam Glapinski stated subsequently that interest rate cuts could be approaching amid a significant downward revision in the Bank’s inflation forecasts. That said, all of our panelists expect the Bank to stand pat in Q2, and the majority continue to expect the first rate cuts in Q3. Meanwhile, our Consensus has been raised in recent weeks, and now our panelists expect 75 basis points of rate cuts by the end of 2025, fewer than originally projected. A potentially weaker zloty and higher-than-expected inflation pose upside risks to the policy rate. The Bank will reconvene on 6–7 May.

Panelist insight: EIU analysts commented on the outlook: “We forecast 75 basis points of cuts to the policy rate in the second half of 2025, followed by 200 basis points of cuts in 2026, taking the policy rate to 3% by end-2026. […] Risks to external demand and trade have risen following the new US presidential administration's quick implementation of import tariffs (even though most of these are being delayed pending negotiations). This raises risks for Poland's export-oriented economy, and will pressure the NBP to accelerate its monetary loosening schedule.” ING’s Rafal Benecki and Leszek Kasek commented on the risks to the policy rate: “What could push the Council to cut rates below 4.25% is weaker GDP growth in the Trump tariff scenario, leading to lower inflation in the eurozone (oversupply due to Trump's tariffs), or even lower inflation than our forecasts, which were already below the consensus. These uncertainties are the reason why the MPC may prefer to adjust rates in 2025 and wait for a clearer picture in 2026.”

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