Poland's MPC seen cutting rates by 75 bps in 2025, starting in July - PKO BP (opinion)

"In our view, the MPC will start cutting rates in July 2025, and the total scale of cuts this year will reach 75 basis points (in the previous quarterly report, we expected the first cut to be in May and a total of 100 basis points of cuts)," they wrote.

"The possibility of starting the cycle of rate cuts in the second half of 2025 is declared by more than half of the MPC members, and many say that the time for the first cut could come as early as July," they added.

The economists assume that the path of CPI inflation ranking in 2025 below the indications of the March inflation projection will be a support for such a decision.

"Such a scenario is indicated by a lower starting point - Poland's central bank NBP assumes that inflation in the first quarter of 2025 will be 5.4 percent year on year," the economists wrote.

"Today, we already know that it will be around 4.9 percent year on year, so also inflation in the subsequent quarters of 2025 will be correspondingly lower,” they added.

PKO BP experts expect the government to maintain the electricity price cap, and even if it's abandoned, energy prices for households in the fourth quarter of 2025 will be lower than assumed in the March NBP projection (9.3 percent year on year).

As a result, the bank's economists believe that the NBP's July projection will point to a much earlier achievement of the inflation target, thanks to, among other things, a lower starting level, i.e. total and core inflation in the first quarter of 2025 should be about 0.4 percentage points lower in annual terms than assumed in the March projection.

tus/ han/ ao/