Polish policymakers signal wait and see stance as rate cut scope narrows

By Pawel Florkiewicz and Karol Badohal

Scope for further interest rate cuts in Poland is limited and the central bank's monetary policy is moving into a wait and see phase, Monetary Policy Council members said on Wednesday.

In December, the MPC cut its main interest rate (PLINTR=ECI) by 25 basis points to 4.00%. The National Bank of Poland has cut rates six times this year, by a total of 175 basis points.

"If the environment of our economy and its parameters that we are observing today do not deviate significantly in the near future, I'm thinking here of at least a quarter (of the year), then there is still minimal room for such a downward correction," said Polish central banker Przemyslaw Litwiniuk.

"But I would be extremely cautious about making hasty decisions," he told private radio station RMF FM.

He cited factors that could contribute to a possible rebound in inflation, including statistical effects, administered and regulated prices, which may rise early next year, and energy prices, which will be approved in the first months of 2026.

"If this goes according to our projections, I think that around the March projection there will be grounds to confirm our view and take the next step," he said.

Fellow MPC member Ludwik Kotecki also said there was not much room for further easing.

"That's why we managed to reach an agreement within the Council to communicate to the markets and society that in the coming months it will be 'wait and see' rather than further interest rate cuts," Kotecki said during an economic conference.

He added that in his opinion, rates will remain unchanged in January, in February the MPC will not yet have new forecasts from the central bank, and the effects of administered price increases or changes in the inflation basket will not be known.

"Everything will suggest that we should wait at least until March, or even April," said Kotecki.

Asked about the terminal interest rate level, he added the key rate could be cut to 3.75%, giving a real interest rate of 1%, which he said would be "OK".

In November, inflation was 2.4% year-on-year - lower than analysts expected - and came below the 2.5% midpoint of the central bank's target range. The price growth rate will remain in the 2.5-3% range in the coming months, Kotecki said.

Justifying the MPC's December decision, National Bank of Poland Governor Adam Glapinski said the central bank will probably move to a wait-and-see mode before any further cuts.

Policymaker Iwona Duda said the central bank needs to assess the impact of significant monetary policy easing so far this year before making further interest cuts, though the scope for further reductions may be shrinking.