A disturbing voice from the MPC. Is the first raise in 5 years coming?

Last week, the Monetary Policy Council (MPC) decided for the fourth time in a row to maintain interest rates at the current level, as a result of which the main reference rate has been 3.75% since March.

The July MPC meeting was the last one before the summer break. What will happen in September? The President of the National Bank of Poland (NBP), and the Chairman of the Council, Adam Glapiński, emphasized during the last press conference that if it were up to him, he would reduce interest rates by 25 basis points this year. – As far as I’m concerned, a rate cut by the end of the year is probable, but I only have one vote in the Council. It’s hard to say what the other members will decide – said the head of the central bank.

Are the first interest rate increases in 5 years coming?

Any cuts would be good news for borrowers, as it would result in a decline in mortgage or business loan installments. However, it appears that not all Council members share the chairman’s optimism.

Marcin Zarzecki, who joined the MPC members at the end of last year, said in an interview with PAP Biznes that, in his opinion, the base scenario is the stabilization of rates at least until the end of this year. Then, however, there is a greater probability of rate increases than reductions.

— For me, the base scenario is to maintain the reference rate of 3.75%. at least until the turn of 2026 and 2027. Assuming unchanged interest rates, inflation in the projection remains within the range of deviations from the target throughout the horizon, and at its end falls below the target, so any action on rates would be premature for now. However, looking at the risks, the probability of an upward movement of rates in 2027 is rather greater – Zarzecki said.

Let us recall that the last time the Monetary Policy Council increased interest rates was in September 2022.