The May 2025 meeting of the Monetary Policy Council (MPC) is expected to be closely monitored by investors and economists as it may mark a shift toward monetary policy easing. Following a period of elevated interest rates, the MPC faces the possibility of initiating a cycle of rate cuts or implementing a one-off reduction.

Possible Interest Rate Cut in May

Analyst consensus suggests that the MPC may decide to cut interest rates at the May meeting, with a reduction of 0.5 percentage points seen as likely. Such a move would signal a strong adjustment while allowing the Council to monitor future inflation developments. Alternatively, a smaller cut of 0.25 percentage points may signal the beginning of a gradual easing cycle, with further reductions depending on the progress of disinflation and broader economic conditions.

Factors Supporting a Shift Toward Easing

Stabilizing inflation data, despite remaining above the inflation target, along with moderate economic growth and high real borrowing costs, are key arguments for adjusting monetary policy. In addition, decisions by major central banks to begin lowering rates are contributing factors, suggesting a broader trend away from the previous cycle of monetary tightening.

One-Time Adjustment or Broader Policy Shift?

If the MPC opts for a 0.5% cut, it could be viewed as a corrective measure to address an overly restrictive monetary stance. A 0.25% reduction, by contrast, might indicate the beginning of a gradual adjustment cycle, potentially targeting an interest rate level of 4.0–4.5% by the end of 2025.

Outlook

The outcome of the May meeting could represent an important signal for the direction of Polish monetary policy. Beyond the decision itself, attention will focus on the Council’s post-meeting communication, which may clarify whether further easing measures are being considered.

Author: Dawid Rog, Lendi expert

The Leading Economic Indicator (WWK), which signals future economic trends, fell by more than 1.6 points in April 2025 compared to March, reversing much of the growth recorded over the previous two months. The decline is attributed primarily to weak order volumes received by Polish companies, reflecting the country’s reduced competitiveness, ongoing slowdowns among major European trading partners, and elevated global political and economic uncertainty.

Of the eight components that make up the WWK index, two showed slight improvement, while six deteriorated compared to March. The most significant negative influence came from a renewed decline in incoming orders for manufacturing firms, particularly from domestic customers. Export orders showed a modest improvement, with industries such as electronics, car manufacturing, and other transport equipment reporting slower rates of decline compared to late 2024. In contrast, sectors including clothing, textiles, furniture, and wood manufacturing continue to experience notable challenges in export demand.

Some domestic industries, notably food and clothing manufacturing, recorded a slight increase in orders, though this is likely influenced by seasonal factors related to upcoming holidays.

The prolonged stagnation in orders and decreased production have contributed to a worsening financial situation for businesses. Across the manufacturing sector, the proportion of companies reporting a deterioration in their financial condition exceeds those reporting improvements by an average of about 15 percentage points. Sectors most heavily affected by declines in orders correspond to those reporting the greatest financial pressures.

On the Warsaw Stock Exchange, indices experienced a temporary downturn in April, largely attributed to shifts in U.S. customs policy under President Trump. Although markets recovered relatively quickly, underlying uncertainty remains.

Meanwhile, the M3 money supply in real terms, adjusted for seasonal effects, grew at a slower pace in March 2025 compared to February, increasing by nearly 0.4% versus 0.8% the previous month. Household debt from consumer bank loans also rose slightly, by nearly 0.2% month-over-month.

Source: BIEC