By Karol Badohal
WARSAW (Reuters) – The National Bank of Poland is expected to keep interest rates unchanged on Wednesday, after a downward adjustment in May, a Reuters poll showed, as wage dynamics remained volatile and economic growth was strong.
All but one of the 30 analysts in the poll forecast the NBP would hold its key rate steady at 5.25%. The central bank cut the cost of credit by 50 basis points in May, the first easing since October 2023.
NBP Governor Adam Glapinski said following the cut that it did not mark the beginning of an easing cycle and that it was doubtful the Monetary Policy Council (MPC) would risk a further cut in June.
“In post-MPC comments on May 8, NBP President Adam Glapinski essentially pre-announced an on-hold decision in the June meeting,” Goldman Sachs analysts economists wrote in a note, adding they expected the NBP to recommence easing in the third quarter, most likely July.
According to HSBC analysts, positive inflation data, with core moderating faster than expected, warranted last month’s easing, but they pointed to wage volatility and stronger than expected first quarter economic growth as arguments against a subsequent cut.
Data last month showed Poland’s corporate sector wage growth jumped sharply toward double-digit territory in April, from which it had fallen since December. On Monday, an economic output reading for the first quarter confirmed an earlier, faster than expected 3.2% annual growth reading.
Meanwhile Polish consumer price inflation continued to ease in May, to 4.1% on the year, according to an early estimate, though it remained above the central bank’s target of 2.5% plus or minus one percentage point.
“The outlook for headline inflation also hinges on the new electricity tariff to kick in from October, with the announcement due only in late summer/September,” the HSBC analysts wrote. “This justifies a pause near term, in our view.”
Glapinski has pointed to the lifting of the government’s electricity price cap as an inflation risk.
Still, DM AFS brokerage economist Damian Rosinski saw space for back-to-back easings as soon as June.
“Data shows that despite the MPC cutting interest rates by 50 basis points in May, the real interest rate – calculated as the difference between the CPI rate and the NBP rate – remains clearly positive, at a level of over one percentage point,” he said.
“In my opinion, the data opens the door to MPC rate cuts by 25 bp at each subsequent meeting until the end of the year…starting with June. Or other variants of aggressive cuts, including a cut of 50 basis points in June, for the next few quarters.”
He added that Poland’s presidential election result shouldn’t change much and a rate cut on June 4 was highly likely.
(Reporting by Karol Badohal; Editing by Toby Chopra)
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