Dąbrowski from the Monetary Policy Council: Further interest rate cuts only in Q4 2025

The next interest rate cuts may not occur until the fourth quarter of 2025 and this would be the beginning of a cycle of rate cuts in small steps, MPC member Ireneusz Dąbrowski told journalists. He added that in June the Council will discuss reducing the interest rate on mandatory reserve funds.

"I do not foresee any cuts at the next meeting in June, the discussion may return in July, but it will also be more of a discussion than a decision. First of all, we are waiting for data on energy prices and new tariffs, (...) they weigh a lot. The second thing is the impact of interest rate changes - how will they affect expectations. The third thing - how will wage pressure change - it is slightly above the limit we would like. We are simply waiting for the data. (...) As for further decisions, I am rather talking about Q4, but at the moment I would not make a firm declaration. There are many factors that will influence our decisions," said Dąbrowski on the sidelines of a scientific conference at the Warsaw School of Economics.

"I assume that we are waiting for the cycle to start. I assume that we have made the adjustment and we will see what impact this adjustment will ultimately have. (...) The next step will probably be a cycle, but it is hard for me to say when - a cycle understood as many small steps. I am in favor of any further changes having the nature of a cycle and taking place in a situation of very high certainty that we will permanently return to the inflation target," he added.

NBP President Adam Glapiński announced at a May press conference that the statements of MPC members at the May meeting indicated that if the Council decided to further lower rates in July or in the fall, the majority would support the cycle. He added that for the central bank, moves of 25 basis points are more convenient than adjustments of 50 basis points.

Dąbrowski was unable to say how much interest rates might change by the end of the year because, in his opinion, there is too much uncertainty.

"I won't mention global uncertainties. Today we have a new world - on Sunday there was a Sino-American agreement. Global uncertainties will also be added to this. Oil is already above USD 60 per barrel," he added.

Dąbrowski announced that in June the Monetary Policy Council will discuss lowering the interest rate on mandatory reserve funds, but the outcome of this discussion is currently uncertain.

"I don't know what direction the discussion will take in June - rather towards reducing the interest rate on the reserve requirement, but what the conclusion will be - I really don't know. We will rather talk about the interest rate than the level of the reserve requirement itself," he added.

The reserve requirement rate is currently 3.50%, and the interest rate on reserve funds is set at the reference rate, i.e. after the May cut, it is 5.25%.

The NBP President announced at the beginning of May that the subject of mandatory reserve parameters would appear on the agenda of the June MPC meeting. (PAP Biznes)

tus/ ace/