The Monetary Policy Council cuts rates by 25 points. Arguments behind this decision

The Monetary Policy Council lowered interest rates for several reasons. Firstly, there is a weakened condition of the global economy, as well as persistent uncertainty about future economic activity in the largest economies. Especially in the euro zone, where the annual dynamics of economic activity in the third quarter may have declined, while in Germany it remained negative.

Secondly, the reduction in inflation in many countries, while maintaining increased annual price dynamics, is noticeable. The decline in raw material prices and the easing of tensions in global supply chains reduce price pressure, which is reflected in lower production prices. Nevertheless, core inflation remains relatively high, although on a downward trend.

Thirdly, the weakening global economic situation also affected the Polish economy, which translated into a lower dynamics of economic activity, a decline in retail sales and industrial production. Despite this, the labor market remains stable and unemployment is low. However, employment dynamics in the corporate sector has slowed down.

Fourth, the data indicate a decline in inflation, both the overall CPI and core inflation. The main factors influencing the decline in inflation were lower prices of energy, food and non-alcoholic beverages. Relative to data GUS it can be predicted that core inflation is also falling. The lower dynamics of sold industrial production prices indicates that external supply shocks are fading and cost pressure is limiting.

Based on these facts, the Monetary Policy Council decided to reduce interest rates NBP. This is consistent with the NBP's inflation target in the medium term. The Council believes that reducing inflation may contribute to the strengthening of the Polish zloty, which is consistent with the fundamentals of the domestic economy. The Council will continue to monitor the situation and its future decisions will depend on the incoming data on inflation and economic activity.

Based on the communiqué accompanying the Monetary Policy Council's decision.