Inflation in Poland has already entered the permissible deviation range from the National Bank of Poland’s (NBP) target and is expected to remain there for an extended period. The Monetary Policy Council (RPP) is aware of this, which is why upcoming meetings are likely to bring interest rate cuts. According to economist Dr. Jarosław Janecki, a reasonable level for the main policy rate would be between 3.5% and 4%, implying cuts of 100–150 basis points from the current level.
“The inflation index is getting lower, and there is a strong likelihood that inflation will remain within the NBP target band of 2.5% ±1 percentage point for several months,”
says Dr. Jarosław Janecki, lecturer at the Warsaw School of Economics and chairman of the Polish Economic Society Council, in an interview with Newseria.
“This is mainly due to the fact that food prices – the key component of the inflation basket – are not rising sharply. Energy, gas, and fuel prices are either frozen or declining. Therefore, in the coming months, inflation around 2.5–3% is a realistic scenario we should expect.”
Inflation Falls to 3.1%
In July, consumer inflation fell to 3.1% year-on-year, according to the Central Statistical Office (GUS). This was the lowest rate since energy prices were partially unfrozen in 2024, following the earlier reintroduction of VAT on food. This places inflation within the 1.5–3.5% target band set by the NBP (2.5% target ±1 p.p.).
Food and non-alcoholic beverages rose on average by 4.9% compared to July 2024, energy carriers by 2.4%, while fuel prices for private transport were 6.8% lower than a year earlier.
Core inflation, excluding food and energy, reported by the NBP, stood at 3.3% in July, down from 3.4% in June – also within the central bank’s acceptable range. According to the NBP’s July inflation projection, average inflation in the third quarter is expected at 2.9%, which appears realistic. In the fourth quarter, inflation is forecast to rise to 3.6%, driven by the anticipated unfreezing of energy prices – though the government plans to delay this until year-end.
Room for Rate Cuts
“I believe that at its first decision-making meeting in September, the Monetary Policy Council will see low inflation within the target range,”
predicts Janecki.
“Secondly, Council members are likely to be confident that energy prices will not surge in the coming months. And thirdly, wage growth – a key factor for inflation – is slowing. Year-on-year growth is no longer double-digit, now around 8%, and may fall further. This creates significant room for interest rate cuts.”
The NBP’s main reference rate currently stands at 5%, after the RPP unexpectedly cut borrowing costs by 25 basis points in early July. Despite this, it remains significantly above the roughly 3% inflation rate. Market participants broadly expect further cuts in the coming months. These could come as early as September or October, once decisions are made regarding the remnants of the anti-inflation shield, or in November, when the RPP reviews the latest inflation projection – published by the NBP’s Economic Analysis Department three times a year: March, July, and November.
“There is considerable space for rate cuts. In the latest NBP projection, inflation is expected to fall to 2.1% by the fourth quarter of 2027. If, in the long term, inflation may even fall below the target, then interest rates in the 3.5–4% range would be rational,”
assesses Janecki.
“The key question is how quickly to move from the current 5% level – in what steps, at what timing, and by how much. But if the rate ultimately settles around 4%, it should not disrupt price stability in the long run.”
