The Monetary Policy Council (RPP) has decided to cut interest rates by 25 basis points, marking another surprise move from Poland’s monetary authorities this year. The key reference rate now stands at 4.5%, and today’s cut is the fourth in 2025, although it is worth noting that the first, in May, amounted to 50 basis points. Altogether, the cumulative reduction in interest rates this year has reached 125 basis points.
It is also possible that further cuts will follow in November and December, which would bring rates closer to the long-term neutral level, theoretically estimated at 3.5%. The market consensus ahead of today’s decision pointed to unchanged rates, but analysts and economists were clearly divided, with a slight majority expecting no change.
Today’s move was made possible by lower-than-expected inflation in September, which held steady at 2.9%, below the forecasted 3% and within the National Bank of Poland’s target range. The government’s decision to extend energy price caps until the end of the year supports the view that upcoming inflation projections, to be published in November, will show a faster convergence toward the target. Additionally, wage growth has slowed — rising by 7.1% year-on-year in August, the lowest rate since 2021. Although members of the Monetary Policy Council continue to flag wage growth as a potential inflationary risk, it is worth noting that just a few months ago, the pace of pay increases was still in the double digits.
The new inflation projections due in November are likely to indicate further disinflation toward the 2.5% target, possibly even next year. Moreover, medium-term projections suggest inflation could fall below that level in the following years, implying that the cycle of interest-rate reductions cannot continue indefinitely. NBP Governor Adam Glapiński has repeatedly suggested that the neutral level of interest rates in Poland may be around 3.5%.
For borrowers, the latest cut means that average mortgage installments in Poland will fall by another few dozen zlotys per month. Taking into account the total scale of monetary easing this year, the cumulative savings per installment now amount to several hundred zlotys, depending on loan size.
The zloty weakened slightly against the euro immediately after the announcement but remained stable in the longer term, hovering just above 4.25 PLN/EUR. Against the US dollar, however, the currency has depreciated more noticeably in recent weeks, reflecting broader euro weakness amid rising uncertainty about the European economy. Nevertheless, the initial dip in the zloty following the RPP’s decision was largely reversed within minutes.
Source: CEO.com.pl – RPP cuts interest rates for the fourth time this year, reference rate drops to 4.5%
