The MPC reduces interest rates. Here are the key reasons for her decision

On Wednesday, May 7, the Monetary Policy Council (RPP) made a key decision regarding the amount of interest rates. After a two -day meeting, the MPC decided to reduce the reference rate of the National Bank of Poland (NBP) by 0.5 percentage points, i.e. to 5.25 percent.

After 16:00, the Monetary Policy Council published a message in which she indicated that the decision was influenced by lower inflation readings – both ongoing and forecast – slowing down wages and weaker data from the economy.

“Considering the flowing information, including the lower current and forecast inflation, the depression of wage dynamics and weaker data on the conjunction, in the opinion of the Council it has become justified to adjust the level of NBP interest rates” – reads the MPC.

How does the MPC explain the decision on interest rates?

As the MPC notes, in the first quarter of 2025 the economic growth rate in Poland was probably lower than expectations and slightly weaker than at the end of 2024. In March, retail sales and construction and assembly production fell, while industrial production increased. Low unemployment is maintained on the labor market, although employment in companies has fallen year to year. The wage increase remains high, but its dynamics are weakening. CPI inflation, according to quick respect, fell to 4.2 percent in April. from 4.9 percent in March. This is the result of, among others cheaper fuels and the expiry of last year’s VAT increase for food.

“Considering the CSO data, it can be estimated that in April this year inflation also decreased after turning off the prices of food and energy, with the still increased dynamics of services prices. Earlier increase in the administered energy prices, as well as the still increased annual dynamics of food prices and non -alcoholic beverages translate into a still increased level of CPI inflation,” reads the Republic of Poland.

What next with interest rates?

According to the MPC, its further decisions will depend on the information on the prospects of inflation and economic activity.

“The factor of uncertainty remains the formation of demand pressure and the situation on the labor market in the following quarters, the level of administered energy carriers and further activities in the field of fiscal policy. The source of uncertainty is also the formation of inflation in the world, including due to changes in the commercial policy of the main economies” – informs the RPP.

The NBP announces a continuation of activities for macroeconomic and financial stability, focusing primarily on the permanent return of inflation to the target in the medium period. If necessary, interventions on the currency market are also possible.