The Monetary Policy Council (MPC) has decided to re-open its policy loosening cycle as it moved to lower interest rates by 25bps across-the-board. Only a small minority of bank economists predicted such a decision, though some of them did not rule out an interest rate cut in the summer.

Thus, the key reference rate is 3.0% as of May 9 - the lowest level ever in Poland. Other rates will be as follows: lombard rate at 4.50%; deposit rate at 1.50%; rediscount rate at 3.25%.

In the opinion of the Council, the incoming data indicate that economic growth in Poland remains weak, while inflation decline is stronger than forecasted in the March projection. At the same time, uncertainty about the pace and timing of the expected recovery in the euro area has increased, which can adversely affect economic activity in Poland. Hence, the risk of inflation staying markedly below the target in the medium term has risen, MPC said in its release.

"Therefore, the Council decided to lower the NBP interest rates. The Council's decisions in the coming months will depend on the assessment of the incoming data with regard to probability of inflation remaining markedly below the NBP target in the medium term," the document reads. Notably, this paragraph differs from last month's version as it omits the following phrase (at the end of the last sentence): "and regarding economic activity." Indeed, NBP governor and MPC chairman Marek Belka admitted that the Council thus wanted to signal that it puts more emphasis on CPI than on GDP.