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PKO BP SAPoland may meet conditions for rate cut in May, total cuts in 2025-2026 by 100 bps - PKO BP (opinion)
Conditions for a rate cut in Poland may be fulfilled in May, cumulative cuts in 2025 and 2026 could amount to 100 basis points, Poland's largest lender by assets PKO BP analysts estimate in a report.
"Given the already realised scale of the inflation decline and expectations of its continuation to the inflation target and the prospect of a 1.5-2 year negative demand gap, we see room for a decline in nominal rates, which would stabilise real rates at a slightly positive level (1-2 percent), implying a neutral monetary policy," PKO BP analysts assessed.
They added that this would imply a decline in the nominal rate ultimately to around 3.5-4 percent.
"We think the reductions should occur in line with the guidance indicated earlier by the MPC, once the inflation peak has passed and with the certainty of an imminent return to the inflation target," the analysts wrote.
"In our view, these conditions will be fulfilled in May and then we see room for a first move by the MPC. We agree that the cycle of reductions should be cautious, hence it will be optimal to spread it evenly over time, which in our view would give room for a total of 100 bps cuts in 2025 and 2026," they added.
According to PKO BP experts, in the alternative scenario, real interest rates will rise, and the scale of monetary policy restrictiveness will increase further, excessively cooling the economy.
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