On Wednesday, May 7, 2025, the Monetary Policy Council (RPP) concluded its two-day meeting and announced a significant decision to lower interest rates by 50 basis points. This move, anticipated by both borrowers and the government, aims to stimulate economic growth by encouraging investment and consumer spending. Prime Minister Donald Tusk and Finance Minister Andrzej Domański are particularly hopeful that this decision will lead to a boost in economic activity, a crucial factor for the nation’s recovery.
The market had expected this reduction, and it aligns with signals sent by RPP President Adam Glapiński and other council members since early April. The reference interest rate now stands at 5.25 percent, a significant drop from the historical maximum of 6.75 percent recorded in September 2022. This is the first interest rate cut since autumn 2023, marking a pivotal shift in Poland's monetary policy.
As a result of this rate cut, many borrowers can expect relief in their monthly payments. For instance, a borrower with a 500,000 PLN loan, repaid over 25 years with a margin of 2.1 percentage points, will see their monthly payment decrease by approximately 260 PLN, from 3843 PLN to 3575 PLN. If the WIBOR 6M rate reflects a further anticipated cycle of cuts totaling 100 basis points, the payment could drop an additional 57 PLN, bringing it down to 3518 PLN.
However, the impact of this interest rate cut extends beyond individual borrowers. The government forecasts a 3.7 percent increase in real GDP for 2025, a downward revision from the previously estimated 3.9 percent. Alongside this, a real increase of 3.3 percent in private consumption is expected, while real investment growth is projected at 8.9 percent. These estimates are crucial as Poland prepares to implement projects from the National Recovery Plan (KPO) and other significant public infrastructure investments.
Despite the optimism surrounding these forecasts, experts caution that the effectiveness of the interest rate cut in stimulating economic activity is not guaranteed. Adam Antoniak, a senior economist at ING Bank Śląski, notes that while lower rates may alleviate some financial burdens, they are not the sole factor driving consumer and investment behavior. "The global economic climate and uncertainties surrounding tariffs and material costs are significant concerns for businesses," he explains.
Antoniak emphasizes that the expected increase in investment activity will likely be driven more by EU funds than by lower borrowing costs. The KPO allocates 35 billion euros in loans and 25 billion euros in grants, with a deadline for spending the grants by mid-2026. This urgency may prompt companies to ramp up their investment activities.
Urszula Kryńska, head of the Analysis and Forecasting Team at the Macro-Economic Analysis Office in PKO BP, reinforces this point. She notes that 70 percent of investments in large firms (with 50 or more employees) are financed through internal funds, indicating that external financing is not as critical. Furthermore, she points out that uncertainties such as workforce shortages and energy prices can hinder investment decisions more than the cost of credit.
Despite these challenges, the announcement of the interest rate cut has brought some relief to borrowers, particularly those with variable-rate loans. Since early April, mortgage rates have already begun to decrease in anticipation of the RPP's decision, reflecting a proactive market response. The WIBOR 6M rate, which has experienced the largest decline, fell by 0.7 percentage points over the past month, indicating that borrowers are already benefiting from the expected changes.
However, it is essential to recognize that not all borrowers will feel the effects of the rate cut immediately. According to Paweł Onych from Notus Finanse SA, the timing of when borrowers will see changes in their payments depends on the type of interest rate they have. For example, those with loans tied to WIBOR 1M will notice reductions sooner than those linked to WIBOR 6M, which is updated biannually.
Moreover, while the RPP's decision has been met with enthusiasm, there are concerns about the broader implications for the economy. The Polish budget for 2025 anticipates a record deficit of 289 billion PLN, with revenues projected at 632.6 billion PLN against expenditures of 921.6 billion PLN. The government will need to borrow significantly, with gross borrowing needs amounting to 553 billion PLN. Domański emphasizes the importance of keeping interest payments on government bonds low to manage this deficit effectively.
Consumer confidence, however, remains a concern. The current consumer confidence indicator (BWUK) was reported at -16.5 in April, reflecting a decline in optimism. This drop in confidence could hinder spending, as consumers may be reluctant to increase expenditures in an uncertain economic environment. The Główny Urząd Statystyczny reported that consumers are increasingly cautious, with many adopting a wait-and-see approach due to global uncertainties, including inflation risks and geopolitical tensions.
In summary, while the RPP's decision to lower interest rates is a positive development for borrowers and the economy, the actual impact on consumer behavior and investment will depend on various factors, including the global economic landscape and domestic uncertainties. As the country navigates these challenges, the hope remains that lower borrowing costs will stimulate economic growth and consumer spending in the coming months.
