In a significant move, the Monetary Policy Council (RPP) of Poland announced a cut in interest rates for the first time since October 2023, lowering rates by 50 basis points to a new reference rate of 5.25 percent. This decision, made on May 7, 2025, comes after 17 consecutive meetings where rates remained unchanged, reflecting a response to changing economic conditions.
The cut was widely anticipated, with many experts predicting that further reductions could follow. Expectations for the end of December 2025 suggest a potential decrease of between 100 to 150 basis points, indicating a shift in monetary policy aimed at stimulating economic growth.
Adam Glapiński, the President of the National Bank of Poland (NBP), opened the press conference by revealing that the bank holds 509.3 tons of gold, which constitutes 22 percent of its reserves. "We aim to maintain a constant 20 percent of our reserves in gold," he stated, emphasizing the importance of this asset in the bank's overall strategy.
Glapiński also highlighted the pressure from developers to lower interest rates, suggesting that such pressures were not aligned with the bank's primary mission of controlling inflation and maintaining a stable currency. "Interest rates are not meant to regulate mortgage loans and repayments; we are focused on fighting inflation," he asserted.
In recent months, inflation in Poland has shown signs of easing, dropping to 4.2 percent in April from a plateau of 4.9 percent over the previous three months. This decrease, along with a decline in core inflation, was cited as a key reason for the RPP's decision to lower rates. Glapiński noted, "Everything indicates that inflation has already passed its peak, although it remains elevated. Our goal is to achieve a rate of 2.5 percent, with allowable deviations of 1 percentage point on either side."
As the economy adjusts to the new interest rate environment, various sectors are poised to benefit from the changes. For instance, the real estate market is expected to thrive as lower interest rates typically lead to increased borrowing capacity for consumers. "Lower rates will ease the financial burden on companies with high debt, positively impacting industrial enterprises and consumers," said Tomasz Jaroszek, a financial analyst.
However, the banking sector is bracing for potential challenges. Analysts warn that if the RPP were to implement further cuts exceeding 0.5 to 1 percent this year, it could negatively impact bank valuations. Currently, the banking sector is valued similarly to its European counterparts, but prior to the COVID-19 pandemic and the Ukraine conflict, it enjoyed a significant premium due to Poland's rapid economic growth.
Jakub Bentke from AgioFunds TFI noted that the impact of gradual rate cuts would likely not pose a significant threat to bank profits. "If the cuts are spread over time, they won't create substantial risks for bank profits and valuations," he explained. He also pointed out that the real estate index (WIG-real estate) has recently reached levels not seen since the 2007 economic boom, suggesting a robust recovery in that sector.
As for consumers, the reduction in interest rates is expected to lower monthly loan repayments significantly. For example, on a 400,000 PLN loan with a 25-year term, a decrease in interest from 8% to 7.5% would result in monthly savings of approximately 131 PLN, equating to annual savings of around 1,572 PLN. This could enhance consumers' borrowing capacity, allowing them to secure larger loans under the same income conditions.
Despite the potential benefits, some groups may still face challenges in securing loans. Individuals with unstable incomes or poor credit histories will likely find it difficult to access credit, even with the lowered rates. The financial industry remains cautiously optimistic about the future of interest rates, with many analysts predicting that further cuts could be on the horizon if inflation remains subdued.
Additionally, the RPP's decision has implications for tax liabilities. With the reduction in interest rates, taxpayers facing delays in payments will see a decrease in the interest charged on overdue tax obligations. As of May 8, 2025, the statutory interest on tax liabilities has dropped from 14.50% to 13.50%, offering some relief to those struggling with payment delays.
In conclusion, the recent interest rate cut by the RPP marks a pivotal moment in Poland's economic landscape. While the move is expected to stimulate growth and ease financial pressures for many, it also brings uncertainties for the banking sector and those with less favorable credit profiles. The ongoing adjustments in monetary policy will require careful monitoring as the economy navigates these changes.
