In response to the Monetary Policy Council’s (RPP) decision to cut interest rates, the Ministry of Finance has reduced the yields on most retail government bonds. Starting November 1, they will be lowered by 25 basis points, or 0.25%. This means Poles will earn less on their savings invested in these instruments. “With such moves – and I expect there may be more – bonds will become less attractive for the average person, who will start looking for other ways to save,” said former Finance Minister Andrzej Kosztowniak in an interview with Niezależna.pl.
The RPP decided to reduce all key interest rates by 25 basis points, bringing the reference rate down to 4.50% – a move that affects, among other things, borrowing costs.
At the same time, the Ministry of Finance announced this week that starting November 1, the new tranche of savings bonds will have their interest rates reduced by 25 basis points, matching the RPP’s October decision.
“In November, we are adjusting the interest rates on savings bonds to reflect the changes occurring in the financial market,”
the ministry stated on its website.
The one-year bonds, with a variable rate tied to the NBP reference rate, will now yield 4.50%, while two-year bonds will offer 4.65% in the first monthly interest period. In October, these rates were 4.75% and 4.90%, respectively.
According to the Ministry of Finance, the interest rate on three-month fixed-rate bonds will remain unchanged at 2.75%.
The other bonds, in their first annual interest period, will yield 5.25% for four-year bonds and 5.75% for ten-year bonds – down from 5.5% and 6.0% in October.
A Less Attractive Product
Niezależna.pl asked former Finance Minister and PiS MP Andrzej Kosztowniak to comment on the ministry’s decision.
“Minister Andrzej Domański took advantage of the opportunity created by the RPP’s interest rate cut. What’s puzzling, however, is that when we had higher inflation and higher interest rates, the minister didn’t protest against the Monetary Policy Council’s decisions. When inflation rises and interest rates are higher, it increases state revenue, mainly from VAT and excise taxes,”
he pointed out.
“Now the minister has reduced the value of these bonds on the domestic market by 25 basis points. From an income perspective, this financial instrument is no longer as attractive, since part of the value, which the ministry would have had to pay back at redemption, has been taken away,”
he added.
“The minister is taking advantage of a situation that allows him to lower the cost of servicing public debt, and let’s remember, government bonds are issued primarily to finance Poland’s debt. Considering the scale, its growing pace, and the size of the deficits, those 25 basis points translate into a significant amount of money over a year. Of course, this doesn’t encourage us to save using this instrument, as it has become less profitable. People will look for alternatives, perhaps cryptocurrencies or other forms of saving,”
he continued.
“The Ministry of Finance is looking at everything strictly through the lens of the state budget. That’s the only perspective that matters right now. And it’s no surprise, given the enormous problems this government is generating. There’s less and less money, while expenses and needs are clearly rising. So, colloquially speaking, the Ministry of Finance will be ‘hunting for percentage points,’ seeing them as a way to reduce debt servicing costs and thus cut spending. If the minister has such an opportunity, I am convinced he will continue to take advantage of it in the coming months,”
he concluded.