The National Bank of Poland (NBP) kept its reference interest rate unchanged at 5.25% on June 4.

The decision to hold follows a cut of 50bp in May, the first reduction in NBP’s interest rates since 2023. The Polish inflation rate came in at 4.1% year on year in May, easing from 4.3% y/y the preceding month, the NBP noted, adding, however, that inflation remains “elevated” due to high dynamics of food and alcohol prices as well as an earlier rise in administratively-controlled energy prices.

That said, Poland’s energy market regulator last week announced a 15% fall in gas tariffs from July, which will cancel out earlier increases to an extent and strengthen the disinflation process in the coming months.

“Further decisions … will depend on incoming information regarding the outlook for inflation and economic activity,” the central bank said in a statement.

“A source of uncertainty remains the evolution of demand pressure and the labour market situation in the coming quarters, the level of administered energy prices, and the shape of fiscal policy. Global inflation trends also pose a risk, particularly due to changes in trade policy by major economies,” the NBP also said.

Analysts now expect the NBP to administer a rate cut in July.

“We think that interest rates will be cut again at the central bank’s next meeting in July, and the risks to our forecast for the policy rate to be lowered to 4.75% by the end of this year have shifted slightly to the downside,” Capital Economics, a London-based consultancy, said.

“We still believe that the NBP will continue its cycle of interest rate cuts, with July presenting a good opportunity for the next move – when inflation is expected to approach the target and the new projection will likely show a further decline,” PKO BP said.

The Polish bank added, however, that there remains uncertainty over the “impact of the accelerated fulfilment of promises announced by the government following the lost presidential election, which could signal a looser fiscal policy.