Poland's Central Bank Cuts Interest Rates Amid Easing Inflation

On September 3, 2025, the National Bank of Poland (NBP) lowered its benchmark interest rate by 25 basis points to 4.75%, aligning with market expectations. This decision follows a notable decline in inflation, which fell to 2.8% in August, the lowest since summer 2024, and significantly down from a peak of over 18% in 2023. Analysts from ING noted that while economic growth remains solid, it is not generating additional inflationary pressures, with wage growth slowing to 7.6% year-on-year in July.

Poland's central bank cuts interest rates, fiscal policy and wage risk factors

Despite the positive inflation data, concerns regarding Poland's fiscal policy persist. The government has revised its public sector deficit forecast for 2025 to 6.9% of GDP, up from 6.3%, and projects a deficit of 6.5% for 2026. Finance Minister Andrzej Domanski emphasized the importance of curbing the deficit while acknowledging the ongoing geopolitical tensions, particularly with Russia, which necessitate increased defense spending. The draft budget for 2026 indicates that high expenditures on defense, welfare, and debt servicing could hinder efforts to reduce the budget shortfall.

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The Monetary Policy Council (MPC) indicated that further rate cuts could occur, with another reduction anticipated in November, contingent on updated inflation and GDP forecasts. Analysts from Deutsche Bank and Bank Pocztowy predict that the NBP may continue to lower rates gradually, potentially reaching 4.5% by the end of the year. However, uncertainties surrounding regulated energy prices, particularly the expiration of the electricity price cap for households in October, pose risks to inflation stability.

Poland's central bank cuts interest rates, fiscal policy and wage risk factorsPolish Central Bank Seen Cutting Key Rate by 25 Bps on Wednesday: Reuters PollPoland's central bank cuts interest rates, but concerns about fiscal policy growAnother rate cut in the “cycle of adjustments” by Poland’s central bankEuronews

Critics, including EY analyst Maciej Stefanski, argue that the MPC may be overemphasizing energy prices as a risk factor. Concerns have been raised about the government's expansionary fiscal policy, which could undermine the effectiveness of monetary policy adjustments. Rafal Benecki, chief economist at ING, warned that the current fiscal trajectory does not suggest significant tightening, potentially leading to a higher equilibrium interest rate than previously anticipated.

Poland's central bank cuts interest rates, but concerns about fiscal policy grow

The NBP's recent decisions reflect a cautious approach to monetary policy, balancing the need for economic stimulus against the backdrop of fiscal challenges. NBP Governor Adam Glapinski is expected to address these issues in an upcoming press conference, where he may highlight the implications of fiscal policy on future monetary decisions.

Another rate cut in the “cycle of adjustments” by Poland’s central bank

• “Taking into account inflation developments, in the Council's assessment, it became justified to adjust the level of the NBP interest rates,” — National Bank of Poland's Monetary Policy Council

Poland's central bank cuts interest rates, fiscal policy and wage risk factors

• “A risk to price stability is fiscal policy, which is more expansionary than previously announced.” — Rafal Benecki, Chief Economist at ING

Poland's central bank cuts interest rates, but concerns about fiscal policy grow

• “Curbing the deficit is key, but let’s remember the situation that Poland is in.” — Finance Minister Andrzej Domanski

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This interest rate cut marks a significant moment in Poland's economic policy, reflecting both the successes and challenges facing the country as it navigates a complex economic landscape.

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