Central Bank cuts rates in September

Rates fall to over three-year low: At its meeting on 2-3 September, the Central Bank decided to cut the NBP reference rate by 25 basis points to 4.75%, bringing interest rates to their lowest level since April 2022. The decision mirrored July’s cut and was aligned with market expectations.

Favorable inflation panorama motivates cut: Declining inflation drove September’s decision, with price pressures falling into the Central Bank’s 1.5–3.5% target range in July and staying there in August. As a result, real interest rates remained elevated. Meanwhile, accelerating GDP growth in Q2—supported by a faster rise in consumption—and still-elevated annual wage growth likely ruled out a larger rate cut.

Policy outlook: Most of our panelists expect at least 25 basis points of further rate cuts by December as inflation remains within target in the remainder of the year. That said, a number of analysts see rates ending 2025 at current levels. Slower-than-expected inflation and GDP growth pose downside risks. The Bank will reconvene on 7–8 October.

Panelist insight: ING’s Rafal Benecki and Adam Antoniak commented: “The [Central Bank] is likely to pause in October, with the next discussion on a possible rate cut expected in November, when the Council will review the next inflation projection (which will include, among other things, the stabilisation of electricity prices in 3Q25). The target level for the NBP reference rate, which we had previously assessed at 3.5%, may ultimately prove higher or be reached later than anticipated, due to an adjustment in the policy mix towards a more restrictive monetary stance to offset the expansionary fiscal policy.”

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