Poland’s Monetary Policy Board (RPP) – the National Bank of Poland’s (NBP’s) rate-setting body – is expected to keep rates unchanged at 6.75% for an 11th consecutive meeting on July 7.

But speculation of an interest rate cut has grown recently in the wake of  comments from NBP Governor Adam Glapinski, who suggested last month that a reduction in interest rates might be on the cards if inflation falls below 10% and if there were grounds for a sustained drop afterwards.

Inflation is near the 10% threshold now – and much earlier than expected  – as price growth surprisingly eased to just 11.5% y/y in June. That is 6.9pp below February's peak.

“The positive inflation surprise in June will likely intensify the dovish rhetoric of the NBP president at the Friday [July 7] press conference,” Bank Millennium said in a comment.

Some analysts say that the odds of a rate cut are now substantial.

"We estimate that the chances of a rate cut after August ... have increased to 65%-70%. We [also] see more than one interest rate cut in 2023 as possible," ING said.

The NBP is also going to release a new inflation and GDP projection tomorrow.

“We believe medium term inflation and economic growth trajectories will not deviate substantially from the March outlook. The inflation forecast will most likely be revised slightly upwards in 2023, influenced by a higher starting point,” Credit Agricole said in an analysis.

“The projection will probably still show that inflation will fall below the upper band for deviations from the inflation target, which is 3.5% y/y, in the second half of 2025,” Credit Agricole also said.

The region’s other independent central banks, which were the first in the EU to raise rates – and to much higher levels than in Western Europe – have so far been reluctant to start to lower them until inflation falls further and government's start to lower budget deficits. The Czech, Estonian and Slovak governments – and to some extent the Hungarian – are beginning to impose austerity policies despite their economies still being in recession or just emerging from it.  

Only the Hungarian National Bank (MNB) has begun loosening, by reducing the interest rate on the one-day quick deposits offered at daily tenders by 100bp to 17% in May.

The Czech central bank, which has held its key rate at 7% for a year, had been anticipated to start cutting rates this summer but now most analysts forecast a rate cut only at the end of the year.