Poland keeps interest rate steady as inflation lingers above target

Poland’s central bank has revealed its reluctance to cut interest rates before the end of this year, as a number of economic factors risk pushing inflation up once more.

The National Bank of Poland kept its benchmark interest rate steady at 5.75% at its January meeting on Thursday, in line with analyst estimates. The reference rate has stayed the same since October 2023.

January’s decision was in line with the central bank’s current hawkish stance, which was emphasised last month. Back in the December meeting, Adam Glapiński, the president of the National Bank of Poland, revealed that the central bank may not slash interest rates until the end of this year.

This is mainly because of the ongoing threat of inflation rising once again, as well as the strength of the US dollar, supported by the US Federal Reserve’s own hawkish position.

Expiring energy price caps in 2025 are also expected to push inflation up again, further discouraging the central bank from considering cutting interest rates at the moment.

The Euro/Polish zloty pair inched up 0.18% to 4.26 on Thursday afternoon, ahead of the interest rate decision.

Poland’s year-on-year inflation rate came up to 4.7% in December 2024, the same as November, according to the Central Statistical Office of Poland (GUS). However, this was marginally less than preliminary estimates of 4.8%.

Non-alcoholic beverages and food costs were stagnant at 4.8% in December, with communication costs also staying the same at 4.1%. However, transport costs fell at a slower pace in December, at -3.3%, from -4.1% in November.

Tobacco and alcoholic drinks’ prices also grew at a milder rate in December, at 3.3%, down from 3.9% in the previous month.

Culture and recreation prices also dropped to 5.5% in December, down from 6.1% in November.

However, utilities and housing costs rose at a quicker rate to 10.1% in December, up from 9.9% in the previous month. Health costs also inched up to 5.5% in December from 5.3% in November.

Polish economy expected to grow in 2025

The Polish economy is likely to expand in 2025, according to the European Commission. The gross domestic product (GDP) growth rate is estimated to rise to 3.6% this year, from 3% in 2024, before stabilising at 3.1% in 2026.

The European Commission said on its website: “In 2025, real GDP is forecast to increase by 3.6%. Private consumption is set to remain the key driver of growth alongside investment, including EU-funded public investment and investment related to reconstruction following the September 2024 floods.

“The negative contribution from net exports is expected to narrow on account of a rebound in exports as economic growth in key trading partners picks up.”

Inflation is also expected to average about 4.7% in 2025, which would be a sharp rise from 2024’s 3.8%. In 2026, Polish inflation is likely to fall back down to 3%.

This year, the Polish unemployment rate is expected to average 2.8%, before dipping slightly to 2.7% in 2026. In contrast, in 2024, the unemployment rate averaged 2.9%.