Polish Central Bank Expected to Reduce Key Rate by 25 Basis Points on Wednesday, According to Reuters Survey

National Bank of Poland Interest Rate Outlook

• Expected Rate Cut: A majority of analysts predict that the National Bank of Poland (NBP) will lower its key interest rate by 25 basis points to 4.75% in the upcoming meeting, as inflation has fallen within the bank's target range.
• Recent Rate Changes: The NBP had previously cut the main rate by 25 basis points in July, following a 50 basis point cut in May, after maintaining a steady rate of 5.75% since autumn 2023.

Inflation and Economic Indicators

• Current Inflation Rates: A flash report indicated that consumer price growth in August was 2.8% year-on-year, slightly lower than the 3.1% recorded in July, both figures falling within the NBP's inflation target of 2.5% ± 1%.
• Analyst Predictions: Deutsche Bank analysts expect a 25 basis point cut, citing recent communication from the NBP and inflation data as supportive of this view.

Fiscal Concerns and Energy Prices

• Budget Deficit Projections: Poland has raised its 2025 budget deficit forecast, with expectations of a modest decrease in 2026, primarily due to high spending on defense, welfare, and debt servicing.
• Energy Price Risks: The uncertainty surrounding future electricity prices, particularly with the expiration of the household price cap in October, poses a potential inflation risk, which may influence the NBP's decision on rate cuts.

Diverging Opinions Among Analysts

• Mixed Predictions: Some analysts, like EY's Maciej Stefanski, suggest that while further monetary easing is justified, the uncertainty regarding energy prices could lead to a pause in rate cuts.
• Future Rate Expectations: Even if rates remain unchanged in September, there is an expectation of gradual cuts in subsequent meetings, averaging 25 basis points every two months.