Poland’s central bank cuts rates again as inflation slows

Poland's central bank cut its main interest rate by another 25 basis points to 4.25% on Wednesday, citing a slowdown in inflation and an improvement in its outlook, the National Bank of Poland said in a statement.

"Taking into account a decline in inflation and an improved inflation outlook for the coming quarters, in the (Monetary Policy) Council's assessment, it became justified to adjust the level of the NBP interest rates," the central bank said.

The rate cut decision was in line with the predictions of most analysts - such a scenario was forecast by 26 of 31 economists surveyed by Reuters. This year, the key interest rate has been cut by a total of 150 basis points.

On Wednesday, the bank presented a new projection of inflation and economic growth, which is one of the key factors for the Monetary Policy Council when making decisions on the level of interest rates.

The bank sees inflation of 3.6%-3.7% in 2025, against a July projection of 3.5%-4.4%. It projects inflation of 1.9%-4.0% in 2026, compared to 1.7%-4.5% in July and 1.1%-4.1% in 2027, against a previous projection of 0.9%-3.8%.

The bank expects annual GDP growth to be in the range of 3.1%-3.8% in 2025 (against 2.9%-4.3% in the July projection), 2.7%-4.6% in 2026 (compared to 2.1%-4.1%) and 1.5%-3.7% in 2027 (compared to 1.3%-3.7%).

Further decisions of the Council will depend on incoming information regarding prospects for inflation and economic activity, the bank said.

"Fiscal policy, recovery of demand in the economy and elevated wage growth remain risk factors for low inflation. Uncertainty stems also from the level of energy prices and inflation developments abroad," the central bank said.

Analysts said there may be more monetary policy easing to come and were awaiting Thursday's press conference by NBP Governor Adam Glapinski, who will give the reasoning behind the latest decision.

"Plenty of good, though expected, news. In 2026, inflation at around 3%, in 2027 it stays within target. Plus a strong upward revision to GDP growth for 2026. That's still a solid foundation for further rate cuts (in our view -75 bp in 1H26)," Pekao analysts said on X.

Last month, the Monetary Policy Council cut borrowing costs by 25 basis points and Glapinski said it saw some room to cut them again although it remained uncertain whether that would happen in November.