Economic news

• MONETARY POLICY: As expected, the MPC did not change interest rates during its June meeting. The NBP governor’s press conference was unsually short, but still managed to convey a hawkish message. As a result, we are not inclined to push the date of the next rate cut from July to September. More on that subject in the next section.
• RATING: Two agencies (Fitch and Moody’s) issued a post-election comment on Polish public finances. Both were constructive, pointing to Poland’s strong economic fundamentals. Both also agreed that fiscal consolidation would likely slow down in the aftermath of the election.
• CREDIT: According to BIK, mortgage loan application jumped by 43% yoy in May and the average loan value rose ta record high of PLN 468k. This is indicative of a recovery in Polish mortgage market and can reasonably be traced back to the 50 bps NBP rate cut in early May. Further improvements in mortgage demand will depend on the amount of monetary easing delivered by the MPC in the coming months.  

For the MPC, caution prevails over macroeconomic indicators

The statement after the June meeting of the Monetary Policy Council (MPC) was notably terse. Of particular note is a paragraph—identical to the one published in May—concerning the balance of risks for monetary policy. It stated that the uncertainty continues to stem from developments in the next quarters in the following areas: labor market, administered energy prices and fiscal policy stance. However, following Friday’s press conference by the NBP Governor — remarkable for its brevity — we now understand that the assessment of these very risk factors will play a decisive role in shaping monetary policy over the summer months. Consequently, we maintain our forecast that the second half of the year will bring further monetary easing amounting to a cumulative 50 basis points of rate cuts. That said, we now expect the timing of the first cut to move from July to September.

Inflation outlook (% yoy)

Source: Statistics Poland, NBP, Pekao Research

To begin with, available macroeconomic indicators have pointed to what can be described as ideal conditions for monetary easing (as we have previously noted). In particular:

• The announcement by the Energy Regulatory Office (URE) regarding the approval of new household energy tariffs implies that CPI inflation could fall to the NBP’s target of 2.5% yoy as early as July. The NBP Governor Glapiński adopted a more cautious view, forecasting continued disinflation to approximately 3% yoy in the early part of 2H25. In our view, average annual inflation will amount to 3.5% yoy, thus reaching the upper bound of the tolerance band around the inflation target.
• Wage pressures continue to ease; although April wage growth exceeded expectations, annualized wage momentum remains on a downward trajectory.

Nevertheless, during the press conference, the NBP Governor repeatedly emphasized the significance of certain risk factors which could potentially elevate the inflation path and compel the MPC to postpone further rate cuts. These risk factors, as outlined by President Glapiński, include:

• More expansionary fiscal policy in 2026–2027 and the lack of fiscal consolidation. This concern has been echoed by multiple international institutions, including Moody’s and Fitch. While there is a possibility that the Ministry of Finance will adhere to the net expenditure path agreed with the European Commission under the excessive deficit procedure (implying approximately 1% of GDP in consolidation for 2026), the forthcoming opportunity to assess the Ministry's appetite for fiscal tightening will only come with the release of the 2026 draft budget. In other words, by the July MPC meeting, official fiscal policy documents for the next year will still be unavailable, while by September, the draft budget is likely to have been released — though not necessarily adopted or signed into law.
• Increase in energy prices in 4Q25 resulting from the expiry of energy price freezes. In our assessment, the probability of such a scenario is negligible, given the ongoing decline in global energy commodity prices. Nonetheless, the NBP has generally been reluctant to incorporate forecasts of regulated prices into its projections unless they are backed by official, binding documentation. This cautious approach was also evident in the March inflation projection. Therefore, while the final tariffs for 4Q may be available by September, it is highly likely that they will remain officially undetermined at the time of the July meeting.

NBP reference rate (%, historical + forecast)

Source: Statistics Poland, NBP, Pekao Research

Taking all of the above into account, we remain confident that additional rate cuts will be implemented in 2025. Governor Glapiński himself indicated that many MPC members are inclined toward monetary easing in the autumn. However, we believe that the likelihood of a 25 bp rate cut in July is now negligibly low.

Financial market update

Capital fled from domestic assets last week. This is firstly the effect of the presidential election and the increase in political risk in Poland (and less fiscal consolidation) and secondly the more hawkish stance of the Monetary Policy Council. The zloty lost three cents to the euro (4.26 -> 4.29) and slightly less against the dollar (3.74 -> 3.765). Yields on Polish 10-year notes, in turn, rose from 5.45 to 5.6%, with most of the move occurring on Friday in reaction to Thursday's press conference by the NBP president. This week we should see a continuation of the flight from risk and further depreciation of the zloty - EUR/PLN is likely to test the resistance at 4.30. On bond yields, meanwhile, we would not be surprised to see a correction after Friday's increases, but a continuation of the discounting of Polish government bonds should be expected later in the week.