Central Bank leaves rates unchanged in July

Fourth consecutive hold meets expectations: At its meeting on 7-8 July, the National Bank of Poland (NBP) decided to keep the reference rate at 3.75% for the fourth consecutive meeting, aligning with market expectations.

Bank remains in wait-and-see mode: Inflation returned to the NBP’s 2.5% target in June, pulled down by lower prices for fuels and food. Coupled with slowing wage growth, declining employment in the private sector and the Bank’s downward revision of its GDP growth forecasts for 2026–2027, this tilted the scales against a rate hike. On the flipside, robust growth in retail sales, industrial output and construction gave the NBP room to stand pat instead of cutting rates.

Policy rate seen on hold, but NBP signals potential cuts by December: The NBP stated that its future decisions will depend on how geopolitical conflict affects global economic momentum and commodity prices. The Bank also stated it will remain vigilant of shifts in fiscal policy impacting domestic inflation and economic growth. Nevertheless, at a subsequent press briefing, Governor Adam Glapinski mentioned the possibility of a rate cut after the summer, given the transitory nature of the recent inflationary spike. Virtually all of our panelists see the reference rate ending 2026 at its current level, as average inflation is likely to exceed the 2.5% target midpoint this year as a whole. Potential rate hikes by the ECB and higher-for-longer energy prices pose upside risks to the policy rate, while softer-than-anticipated inflation and GDP growth could open the door for a cut by December. The NBP should reconvene on 1-2 September.

Panelist insight: ING’s Adam Antoniak and Rafal Benecki commented on the outlook for the policy rate and the zloty: “Our baseline scenario assumes that NBP interest rates will remain unchanged through the end of 2026. However, we note that the central bank's rhetoric has become even more dovish than in June, and the balance of risks has now shifted towards the possibility of a rate cut before year-end. […] The NBP Governor's dovish stance may prolong the weakness of the zloty, particularly against regional currencies. Moreover, the Governor explicitly stated that he is not concerned about the weaker currency, which contrasts with references in official communications to the possibility of foreign-exchange intervention.”

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