FX.co ★ Poland Cuts Key Interest Rate in Surprise Move

In a move that defied widespread expectations for maintaining the status quo, the National Bank of Poland (NBP) reduced its benchmark interest rate by 25 basis points, bringing it down to 5.00% during its meeting on July 1–2. Alongside this adjustment, the Lombard rate was decreased to 5.50%, and the deposit rate was set at 4.50%. This decision was informed by revised forecasts for inflation and GDP, which included a downward adjustment of the Consumer Price Index (CPI) trajectory. Although inflation ticked upwards slightly to 4.1% in June from 4.0% in May, it remained above the upper target of 3.5%. Nonetheless, future projections suggest a deceleration in inflation. Contributing to this outlook was the easing of tensions in the Middle East, which helped to reduce oil prices and consequently provided support for the zloty against both the euro and the dollar. The central bank indicated that additional rate cuts might be on the agenda for September or later in the year.