In a move that surprised financial markets, the National Bank of Poland (NBP) announced a reduction of all key interest rates by 0.25 percentage points during its two-day Monetary Policy Council meeting. The central bank’s main reference rate, which guides borrowing costs, now stands at 5.75%. While this decision aligns with the forecasts of most economists, it caught market participants off guard, as many expected a larger rate cut. Consequently, the Polish zloty strengthened following the announcement.
Piotr Bujak, Chief Economist at PKO Bank Polski, noted that while the rate cut was in line with expectations among economists, it was an unexpected move for financial market participants. Bujak anticipates that the Monetary Policy Council will continue this cycle of rate reductions in the coming months.
The NBP emphasized that future decisions will be contingent on incoming data regarding inflation prospects and economic activity. The central bank pointed to data suggesting ongoing low demand and cost pressures within the economy, as well as diminished inflationary pressures amid a weakened economic environment.
The NBP’s decision to lower interest rates reflects its cautious approach in response to economic conditions. As the central bank closely monitors inflation and economic activity, the direction of future monetary policy will depend on these key indicators.