Central Bank decreases interest rates in October

Cut comes as a surprise: At its meeting on 7–8 October, the Central Bank (NBP) decided to cut the NBP reference rate by 25 basis points to 4.50%. The reduction marked the fourth interest rate cut this year and surprised markets as they had penciled in a hold.

Improving inflation outlook drives decision: The Central Bank opted to cut rates in response to the recent downward trend in inflationary pressures: Inflation fell below 3.0% for the first time in over a year in August and remained unchanged in September. This favorable trend, combined with an improved inflation outlook, justified the adjustment in the NBP interest rates.

NBP to deliver more cuts ahead: The Central Bank did not provide specific forward guidance on future interest rate movements but indicated that further decisions would depend on incoming data on inflation and economic activity. A majority of our panelists expect the Bank to stand pat through end-2025, while a minority has penciled in a final cut. That said, all panelists expect the monetary easing cycle to resume in 2026. The NBP will reconvene on 4–5 November.

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