Monetary Policy Council keeps interest rates as they were

The two-day session of the Monetary Policy Council (MPC) ended on Tuesday (June 6).

The Monetary Policy Council decided to keep the NBP interest rates unchanged:

June session of the MPC was the 9th in a row to end with unchanged interest rates. The decision corresponds with economic forecasts. Many experts claim that a decrease in interest rates will take place no sooner than second half of 2023. Some economists argue that proper circumstances for a decrease in the rates will appear next year.

"According to Statistics Poland flash estimate, CPI inflation in Poland declined to 13.0% y/y in May 2023, compared to 14.7% y/y in April 2023. The decrease in inflation in annual terms was driven by a fall in annual price growth of energy and – although to a lesser extent – food and non-alcoholic beverages, as well as in some other categories of goods," the Council said in a press release.

"Taking into account the available data by Statistics Poland, it is expected that – after a slight decline in April – core inflation significantly decreased in May. At the same time, despite weakening demand growth, the level of annual inflation index was still affected by a significant increase in costs resulting from an earlier strong surge in global commodity prices and disruptions in global value chains that was passed through to consumer prices. However, commodity prices and growth of producer price index have continued decreasing, which signals a further easing of external supply shocks. Together with the lower economic activity growth, it will support a decline in domestic CPI inflation in the coming quarters," the MPC added.

Furthermore, the Council assessed "that the weakening of the external economic conditions, together with a decline in commodity prices, will continue to curb global inflation, which will still contribute to lower price growth in Poland".

"The decline in domestic inflation will be supported by a weakening of GDP growth, including consumption, amid a significant decrease in credit growth. As a result, the Council assesses that the earlier strong monetary policy tightening undertaken by NBP will lead to a decline in inflation in Poland towards the NBP inflation target."

"At the same time, given the strength and persistence of the earlier shocks, which remain beyond the impact of domestic monetary policy, the return of inflation to the NBP inflation target will be gradual. The decrease in inflation would be faster if supported by an appreciation of the zloty exchange rate, which, in the Council’s assessment, would be consistent with the fundamentals of the Polish economy," we read.