Poland’s Monetary Policy Council (RPP) has lowered interest rates by 25 basis points to 3.75%, making the decision despite heightened geopolitical tensions linked to the conflict in the Middle East. The Council acknowledged the recent increase in oil and natural gas prices, which could potentially trigger a renewed rise in inflation. It also considered the sharp weakening of the Polish złoty against the euro, which lost nearly 10 groszy in a single day. Nevertheless, with inflation standing at 2.2% in January, the Council decided that continuing the pause in rate cuts was no longer justified and proceeded with a long-anticipated reduction. The decision may also have been supported by a modest improvement in Poland’s public finances.
The move was made in an environment of elevated uncertainty. Following the launch of a U.S.–Israeli attack on Iran, Brent crude oil prices climbed to around $80 per barrel, while natural gas and other energy commodities also rose. Such developments typically raise concerns about inflationary pressure in the months ahead, especially in countries like Poland that import a significant share of their energy resources. A weaker złoty further increases the cost of imports, which may eventually translate into higher prices for consumers.
However, the Council concluded that the scale of the current shock is not comparable to the surge in energy prices that followed Russia’s invasion of Ukraine. Inflation today is close to the central bank’s target, and real interest rates remain clearly positive. With inflation at 2.2% and the reference rate recently at 4%, the cost of money had been relatively high. The reduction to 3.75% therefore does not represent aggressive monetary easing, but rather a step toward a more neutral level of interest rates.
There were additional arguments supporting the move. NBP inflation projections, prepared before the recent escalation of tensions in the Middle East, pointed to a gradual easing of price pressures. Economic growth remains moderate, while credit conditions are still relatively tight. From this perspective, maintaining high real interest rates could unnecessarily restrain the ongoing economic recovery.
Fiscal conditions also played a role. Poland’s general government deficit reached around 6% of GDP in 2025 and is expected to decline to roughly 5.5% of GDP this year. While still elevated, the trajectory of public finances appears more favorable than it did just a few quarters ago. Financial markets have begun to recognize that the most challenging period for public finances may already be behind Poland.
Critics of the rate cut argue that the central bank made its decision at a moment of significant currency volatility. Like many emerging-market currencies, the złoty tends to react strongly to global geopolitical tensions. In such circumstances, lower interest rates could further weaken the currency and increase inflationary pressure by raising the cost of imported goods.
Nevertheless, the Monetary Policy Council opted for a scenario in which the conflict, although politically dangerous, does not lead to a sustained and significant increase in energy prices. At the same time, the RPP sent a signal that it does not intend to conduct monetary policy in response to short-term fluctuations in oil prices or exchange rates. Instead, the Council judged that the fundamentals of the domestic economy—characterized by low inflation and positive real interest rates—allow for careful and gradual monetary easing. The key question now is whether global tensions will indeed prove temporary or whether they will trigger a new wave of inflationary pressure.
Source:
https://managerplus.pl/stopy-procentowe-w-dol-konflikt-na-bliskim-wschodzie-nie-zatrzymal-rpp-38465
