Millennium economists: There is some risk of the MPC cutting interest rates in June

There is a certain risk of interest rate cuts already in June, but the Monetary Policy Council may be prevented from making such a move by April data on strong growth in retail sales and wages in the corporate sector, say economists at Bank Millennium.

"The data published today strengthen expectations for further interest rate cuts. This is consistent with our previous scenario, in which we assumed a 25 bp cut in the cost of money in July. In recent statements, MPC members spoke about cuts in the autumn or in July, if strong arguments appear. A sustained return of inflation to the band of deviations from the NBP target may be a strong argument for easing monetary policy in July. Then, the MPC will have a new inflation and GDP projection, which will present a lower inflation path, adjusted to current readings and administrative decisions," the report reads.

"These arguments will support another MPC cut before the summer break. There is a certain risk of a cut already in June, but such a move may be prevented by April data on strong growth in retail sales and wages in the corporate sector and the desire to better assess the economic prospects during the July projection," it added.

The Central Statistical Office announced on Friday in a preliminary estimate that prices of consumer goods and services in May 2025 increased by 4.1 percent year-on-year, and fell by 0.2 percent compared to the previous month.

Analysts surveyed by PAP Biznes expected prices to increase in May by 4.3% year-on-year and no changes month-on-month.

Bank Millennium economists maintain their base scenario assuming a decline in the reference rate to 4.50% by the end of this year.

"After today's inflation data, the interest rate market is pricing in a drop in the reference rate to about 4.25 percent," economists point out. (PAP Biznes)

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