MNI NBP WATCH: Poland Cuts Rates As Growth, Pay Rises Slow

The National Bank of Poland defied market consensus to cut key interest rates by 25 basis points to leave the reference rate at 5.00% on Wednesday, as easing pay pressures allowed it to lower the outlook for inflation this year despite June’s upside surprise. (See MNI EM NBP WATCH: June CPI Rise Makes July Hold More Likely)

July’s projection exercise puts average inflation at 3.5-4.4% this year, compared with the 4.1-5.7% seen in March; 1.7- 4.5% in 2026 (versus 2.0-4.8%), and 0.9-3.8% in 2027 (1.1-3.9%), the Bank said in a statement.

“CPI inflation in the coming months will fall below the upper bound for deviations of the NBP inflation target. Taking this into account, in the Council’s assessment, it became justified to adjust the level of the NBP interest rates."

Annual wage growth continued to slow in 2025 Q1, the Monetary Policy Council said. But while enterprise sector wage growth picked up in April, recent data confirms the fall is now broad based. Food and energy prices were largely unchanged from May to June, the Council said, though services price growth remained elevated. 

No direct reference was made to the government’s decision to extend the freeze on household electricity prices for the remainder of the year, or to falling fuel prices. Instead, the Bank said, “earlier increases in the administered energy prices together with continuously heightened annual growth in prices of food and non-alcoholic beverages translate into a still-elevated level of CPI inflation.”

Poland’s economy is seen growing more-or-less in line with previous expectations this year, at 2.9-4.3% in 2025 versus March’s 2.9-4.6% projection. It is then seen picking up slightly to 2.1-4.1% in 2026 (compared to 1.9-4.0%), and 1.3-3.7% in 2027 (versus 1.1-3.5%).