In recent discussions surrounding Poland's monetary policy, Joanna Tyrowicz, a member of the Monetary Policy Council (RPP), has expressed that while there are currently no significant concerns regarding monetary policy, there are also no grounds for interest rate cuts. Tyrowicz stated, "Generally: no breakthrough. There are no major sources of concern from the perspective of monetary policy, but somehow there are no grounds for cuts either. Month-to-month inflation remains high (we do not yet have data for April). If these data are repeated, there may be a time for a rate of 5.75 percent. Why? The current projection says that a rate of 5.75 percent brings inflation to the target with a probability of roughly 60 percent. The current projection depends most on (a) cooling the labor market and (b) not overheating demand."
From November 2023 to March 2025, Tyrowicz has consistently submitted a motion to raise rates by 200 basis points at each RPP meeting. In her analysis of the Polish economy, she noted, "When it comes to retail sales, industrial production, construction production - there is no revival or weakening. In general, we still know nothing about the consumption of services, which is a colossal part of spending." She further elaborated on wage trends, stating, "As for wages, for now we can draw conclusions very cautiously, because of what the data is - we really know very little. Nominally, wages are still growing rapidly. I know that this is not visible in the widely commented GUS data, but I can't help the fact that 'properly analyzed' do not indicate any major slowdown. Inflation is higher than a year ago at this time, so real wages are slightly slower than a year ago at this time, but only minimally, without frenzy and certainly without a clear indication for the coming months."
Tyrowicz also pointed out that enterprise surveys indicate a decrease in employment in Poland by tens of thousands of full-time jobs out of approximately 8 million. However, data from the entire economy suggests a smaller number, primarily due to fewer young people entering the workforce. She believes this reflects the influence of demographics and labor supply rather than a fundamental change in labor demand.
Meanwhile, the Polish Bank Association (ZBP) has projected a total reduction of 100 basis points in the reference rate this year, bringing it down to 4.75%. Tadeusz Białek, the president of ZBP, emphasized the significant impact this cut would have on the financial results of the banking sector. "According to our estimates and observations from our research and analysis department, we expect a reduction of 100 bp this year, i.e., 1 percentage point, which means we would expect the reference rate to be at 4.75% by the end of the year. However, it should be remembered that pro-inflationary phenomena are intensifying again, mainly due to increasing geopolitical risks, particularly the impact of changes in U.S. trade policy on global inflationary processes," Białek stated during a teleconference with journalists.
The ZBP's presentation indicated that the financial results of banks could see a "significant reduction" as a result of falling interest rates. The net financial result of the banking sector was reported at 42.18 billion PLN last year. Białek noted, "The financial results of the Polish banking sector are created by over 81% from the interest result generated in conditions of high interest rates. As interest rates fall, bank results may be significantly reduced." He added that the current results achieved under high interest rates should be viewed as a transitional state and an opportunity to build a foundation for a greater share of the banking sector in expected investment growth.
Looking ahead, RPP member Przemysław Litwiniuk has indicated that conditions are favorable for a 0.5% rate cut in May 2025, with further cuts anticipated later in the year. The next decision-making meeting of the RPP is set for May 6-7, 2025, where a decision on interest rates may be made. Litwiniuk remarked, "In my opinion, there are conditions for adjusting the level of rates in the first half of the year, before the July projection, i.e., at the next meeting, by 50 bp. Perhaps it is worth considering whether to do it in two steps, in May and in June, but at the moment there are no strong arguments in favor of this type of action. Then, after observing the projection, the path of inflation and GDP, further decisions should be made in the fall. I do not rule out another 50 bp in the fall." He also mentioned that if no changes occur by May 7, he would propose a motion to cut rates by 50 bp in May.
As the financial community watches these developments closely, the interplay between monetary policy and economic indicators will be crucial in shaping the future of Poland's economy. With inflation remaining a persistent issue and geopolitical uncertainties looming, the decisions made by the RPP in the coming months will be pivotal.
