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The National Bank of Poland cut interest rates by 25bp as inflation fell below the central bank's target in November, wage growth surprised to the downside in October, and the inflation outlook looks brighter than before. Policymakers may be less eager to continue easing at the current pace and scale, but there is still some room for adjustment in 2026

Policymakers delivered rate cut as expected
 

In line with expectations, the NBP's Monetary Policy Council cut rates by 25bp, pushing the reference rate down to 4.00%. This marks the fifth consecutive rate reduction. Since the MPC’s establishment in Poland in 1998, changes to the policy rate have been relatively rare and typically coincided with major external shocks. Adjustments occurred in 1998 during the Russian crisis, in 2009 amid the Global Financial Crisis, in 2012 during the euro area fiscal crisis, and in 2021 when rate hikes were driven by a sharp post-pandemic inflation rebound.

Dovish presser but another cut in January is not certain
 

We assess the tone of the post-meeting press release as dovish, but it also suggests that policymakers are unlikely to deliver another cut at the beginning of 2026. Policymakers noted that wage growth is no longer “elevated” and the moderation was not assessed as a “gradual slowdown”. The reference to “elevated services price growth” was also removed from the document.

NBP governor press conference
 

The December monthly press conference, chaired by NBP Governor Adam Glapiński, should provide additional information on the arguments behind the MPC decision, but in our view, the Council is likely to take a more cautious policy stance towards further easing. The post-meeting press release suggests that policymakers do not have a strong conviction that inflation will continue to decline and see its current level as comfortable. The Council is not in a position to assess its interest rate stance as being in a “good place”, as the European Central Bank does, but a pause in the rate adjustment in early 2026 seems quite likely.

Further decline in inflation and rate cuts in 2026
 

In 2025, the MPC reduced the NBP policy rates by a cumulative 175bp, and most of the job in the current monetary policy adjustment is done. Still, the inflation outlook appears to be favourable, and there is room for some fine-tuning. According to our forecasts, annual average CPI inflation may be lower than 2.5%. The market is currently pricing in a target rate of 3.50%, but in our view, there is a high probability that the policy normalisation will end with a lower NBP rate.

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