The recent decision of the National Bank of Poland (NBP) and the Monetary Policy Council (MPC) regarding interest rates has drawn attention to the economic landscape in Poland and its implications for the Polish zloty (PLN). In light of this development, market participants eagerly seek insights into the rationale behind the decision and the future forecast for the PLN.

Paweł Majtkowski, eToro Market Analyst, highlights that the NBP and MPC have maintained the level of interest rates, aligning with analysts' expectations. The last interest rate hike in Poland occurred in October 2022, suggesting that there may be no further rate hikes in the near future.

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Please comment on the NBP / MPC decision on interest rates in Poland and the forecast for the PLN.

Paweł Majtkowski, eToro Market Analyst said:

The RPP once again did not change the level of interest rates. This was in line with analysts' predictions. The last interest rate hike in Poland took place in October 2022. It can therefore be concluded, although the Council did not officially state this, that there will be no further rate hikes in Poland.

Although inflation has been falling sharply recently, it remains high all the time, reaching 11.5 percent in June. Despite the declines, Poland currently has the highest inflation in the European Union. In countries where inflation was previously higher, such as Latvia, it has fallen even more dramatically. And it seems that this state of affairs may continue in the coming months. Poland currently has the highest inflation in the EU, and at the same time the lowest unemployment, which seems an ideal mix for an interest rate hike. However, in the current situation, the first interest rate cut, which may occur in the fourth quarter of this year, seems more likely. However, this will be more of a political decision, due to the upcoming elections, than an economic one.

The continued fight against inflation could be jeopardized by the increased level of budget spending associated with the upcoming elections. The race to the Sejm is very close, and this will create a temptation to settle the race by making ever more far-reaching social promises.

With inflation falling, investor concerns about it are diminishing. In eToro's Retail Investors Beat survey covering the last quarter, the percentage of investors considering inflation as the biggest external risk fell from 27 percent to just 7 percent. At the same time, the number of investors worried about the state of the Polish economy rose strongly, from 8 percent to 36 percent. This is a result of concerns about a possible recession and the possible financial impact of the election campaign, also evident in the survey.

Inflation is falling not only in Poland, but also in the US and the Eurozone. In the US, inflation fell from 6.6 percent in January to 4 percent in May. In the Eurozone, it went from 8.6 percent in January to 5.5 percent in June.  In both the U.S. and the Eurozone, we expect one more rate hike of 0.25 percentage points in late July. If the first rate cuts in the U.S. occur in the fall, the RPP will probably be more bold in making its own reductions.