WARSAW, May 7 (Xinhua) -- Poland's Monetary Policy Council (RPP) made a pivotal move on Wednesday by cutting interest rates by 50 basis points, marking the first reduction in 19 months.
The decision of the RPP, a body of Poland's central bank, which lowers the benchmark reference rate to 5.25 percent annually, comes in response to growing calls to ease monetary policy and stimulate economic activity.
The move was widely anticipated by analysts, who noted that persistently high interest rates had helped maintain a strong Polish zloty but negatively impacted exporters. The rate cut is expected to offer relief to borrowers and potentially boost domestic consumption and investment.
Alongside the reference rate, several other key interest rates were also reduced. The lombard rate was lowered to 5.75 percent, and the deposit rate to 4.75 percent.
"These adjustments will directly impact commercial banks and influence loan and deposit conditions for both households and businesses," the National Bank of Poland (NBP) said in a statement.
For mortgage holders, especially those with variable-rate loans, the cut could lead to lower monthly payments. However, savers may see reduced returns on bank deposits as a result.
Economists interpret the move as a signal that the central bank sees room for monetary easing to support economic growth. Lower borrowing costs are expected to encourage corporate investment and increase consumer spending, potentially giving a boost to the Polish economy.
"This was a long-awaited decision. Improved inflation prospects create room for further reductions. We forecast inflation to be around 3 percent year-on-year by mid-2025. In our view, interest rates could fall by a total of 125 basis points in 2025 and reach 3.75 percent by the end of 2026," analysts at ING Bank Slaski wrote in a commentary.
The RPP had kept rates unchanged since late 2023, maintaining a tight stance in response to inflation concerns. ■