With inflation falling to 2.8% in October—below the National Bank of Poland’s earlier forecasts of a possible return above 3%—and core inflation visibly declining, the latest decision by the Monetary Policy Council (RPP) to cut interest rates again comes as no surprise. The NBP’s reference rate now stands at 4.25%, still significantly above the inflation level, which leaves room for further cuts. Lower interest rates directly affect borrowing costs, with mortgage repayments in złoty now decreasing by about PLN 12 to PLN 18 for every PLN 100,000 of debt, providing tangible relief to an increasing number of borrowers.
The RPP today decided to cut interest rates by another 25 basis points, bringing the main rate down to 4.25%. This move was widely expected, as the inflation rate in October dropped to 2.8% (from 2.9% in August and September), opening the door for further monetary easing. This comes despite earlier NBP projections from several months ago, which foresaw inflation rising again above 3% in the second half of the year, driven by higher energy costs, services, and a potential rebound in food prices. Instead, inflation continues to move closer to the NBP’s target of 2.5%.
The October CPI reading came in below economists’ expectations, who had forecast inflation to remain unchanged. On a monthly basis, prices increased by just 0.1%, indicating that short-term price pressures have weakened. Food prices remained unchanged from September. Year-on-year, food and non-alcoholic beverages are 3.4% more expensive—higher than the overall inflation rate, but down from 4.2% in September. Energy carriers increased by 2.6% annually, compared with 2.4% the month before. Fuel prices rose by 1% in October, suggesting that despite some increases in energy commodities, their impact on inflation remains limited, allowing overall inflation to continue falling.
Core inflation—closely monitored by the RPP—also dropped to its lowest level since November 2019, likely reaching 3% (down from 3.2% in September). Core inflation excludes the most volatile components, primarily food and energy, and is considered a key indicator of underlying, long-term inflation trends.
The main argument against further rate cuts remains the government’s expansionary fiscal stance. The draft budget for 2026 projects a high deficit of 6.5% of GDP, only slightly down from around 7% in 2025. This indicates that fiscal stimulus will continue to support economic growth, potentially complicating efforts to bring inflation further down.
The RPP appears aligned with the sentiment of Polish investors, who also see inflation risks receding. According to the latest eToro Individual Investor Pulse survey, inflation has dropped to second place among investors’ biggest concerns after dominating for several quarters. The greatest concern now is the risk of international conflict, cited by 25% of respondents, followed by inflation at 22%, and fears of recession in Poland and globally at 12% each.
The rate cut is good news for mortgage borrowers, as it translates into lower monthly installments—by approximately PLN 12 to PLN 18 per every PLN 100,000 borrowed. However, this only applies to those with variable-rate loans. Borrowers with fixed-rate mortgages will not see any change until the end of their fixed-rate period, typically five years. Lower rates may also apply to other variable-rate credit products, such as personal loans or credit cards. On the downside, savers with bank deposits will face lower interest earnings.
Source: ceo.com.pl
