The Monetary Policy Council (RPP) decided today to lower interest rates by 25 basis points, bringing the base rate to 4.5%. The move came as a partial surprise, as analysts were divided on the likelihood of a rate cut. The decision was made at a time when the latest inflation data for September failed to provide a clear indication of where the Polish economy is heading. Inflation remained unchanged from August at 2.9%, neither rising above the 3% threshold as some had expected, nor declining further. The Council took into account that falling oil and gas prices could help curb inflation in the coming months.
On the one hand, projections from the central bank suggest that inflation could accelerate again in the final months of the year. On the other hand, the law signed by the president freezing energy prices until the end of the year will limit price pressures. As a result, the RPP opted for a cautious step toward a more accommodative monetary policy, marking another 0.25-point cut following the one in September.
Inflation Data Confirm Stability
September data from the Central Statistical Office (GUS) confirmed a stabilization in prices. The CPI inflation rate held steady at 2.9% year-on-year, while economists had expected a slight uptick to around 3.0–3.1%. On a monthly basis, prices showed no change at all — the index stood at 0.0%, compared with expectations of a 0.2% increase. This indicates that price pressures have clearly weakened in the short term.
A notable surprise influencing the inflation figures — and likely the RPP’s decision — was a 0.5 percentage point drop in food prices compared to August, along with a limited increase in energy costs.
Energy and Commodity Markets Support Lower Inflation
The Monetary Policy Council likely also considered that inflationary risks linked to global energy markets have recently eased significantly. Although rising oil and gas prices could theoretically push inflation higher, such a scenario now seems unlikely. Oil prices have fallen recently amid concerns about slowing demand, trade tensions between the US and China, and progress in nuclear talks with Iran that could increase Iranian oil supply on the market. As a result, the global balance is shifting toward surplus, supporting lower prices.
The situation is similar in the gas market. Despite lower storage levels across Europe compared to previous years, Poland’s gas storage facilities are 100% full, and prices remain within the range of €31–33 per megawatt-hour. Additionally, forecasts from the Institute of Meteorology and Water Management (IMGW) suggest that this year’s winter will be mild, which could reduce heating demand and help keep energy prices under control.
Fiscal Policy Still a Challenge
The key argument against further rate cuts remains the government’s expansionary fiscal policy. The draft budget for 2026 includes a high deficit of 6.5% of GDP, meaning fiscal stimulus will continue to support economic growth — potentially complicating efforts to reduce inflation further.
Today’s RPP decision signals that a majority of Council members consider current price stabilization sufficient to justify a modest monetary easing. However, future cuts are not guaranteed and will depend heavily on upcoming inflation readings.
Investor Sentiment
The RPP’s stance appears to align with the sentiment of Polish investors, who also believe that inflation risks have diminished. According to the latest eToro “Individual Investor Pulse” survey, inflation — after dominating investor concerns for many months — has now fallen to second place. The biggest worry for investors is now the risk of international conflict, cited by 25% of respondents. Inflation concerns follow at 22%, while fears of a domestic or global recession are reported by 12% each.
Impact on Borrowers and Savers
The rate cut will be welcomed by mortgage borrowers, as it translates to a reduction of about 12–18 PLN per month for every 100,000 PLN of debt. However, this change does not affect those with fixed-rate loans — their interest rate will only adjust after the fixed period ends, usually after five years.
The drop in rates will also extend to other variable-rate credit products, such as consumer loans and credit card debt. On the downside, savers with bank deposits and term accounts will have to accept lower interest earnings.
Source: CEO.com.pl – RPP cuts rates amid falling energy prices: Oil and gas drive inflation down
