The Polish Monetary Policy Council, as expected by the market, reduced interest rates by 0.5 percentage points. This is the first such decision since 2023 and the signal of a change in monetary policy. What does this mean for borrowers, savers and the economy as a whole?
Why have interest rates been reduced?
Until recently, the MPC held a hawk position without deciding to change for over a year and a half. However, inflation in Poland is steadily decreasing – in April it was only 4.2% year-on-year, which is much less than during the last reduction in 2023, when inflation reached 10%. In addition, the economy has clearly slowed down, and wage increases have slowed down, which has led the Council to mitigate policies.
Who will benefit from lower interest rates?
The reduction in interest rates is good news primarily for those paying mortgages and consumers. Receipts based on variable interest rates may fall in the coming months. For example, the mortgage payment for PLN 300 thousand may decrease by up to PLN several dozen per month.
They also gain companies that can finance investments and current activities cheaper. This could stimulate investment and improve the labour market.
Do the savers have cause for concern?
For those who hold money on deposits or savings accounts, a reduction in the rates unfortunately means lower interest on the accumulated funds. Banks may soon reduce deposit interest rates, which makes real savings more slowly, especially if inflation remains above interest rates.
What's next on interest rates?
Economists predict that the current reduction may be the beginning of a cycle of monetary policy loosening. According to NBP president Adam Glapiński, further cuts of 0.5 pp. this year are possible, and the target foot level may fall to 3.5% in 2026. However, everything depends on a further decline in inflation and the economic condition.
Key effects of interest rate reductions
- Lower instalments of mortgages and cash
- Potential growth of companies’ investments
- Less interest rate on investments and savings accounts
- Possible further reductions in the following months
The interest rate reduction of 0.5 percentage points is a clear signal that inflation is no longer a major threat and support needs a real economy. For borrowers it is a relief, for savers – a challenge. The decision of the RPP may be the beginning of a new trend in the financial market in Poland.
