Central Bank maintains rates in July; hints at rate cuts from 2026

At its meeting on 2–3 July, the Central Bank met market expectations and kept interest rates unchanged, with the reference rate at 5.75%, the Lombard rate at 6.25%, the deposit rate at 5.25%, the rediscount rate at 5.80% and the discount rate at 5.85%.

The key domestic factors influencing the Central Bank's decision to hold included the fact that it expects inflation to rise above the 1.5–3.5% target in the coming quarters, driven by higher energy prices. In addition, the decision was also driven by a gradual economic recovery, as indicated by robust retail sales growth, low unemployment, a high number of working persons and still-high wage growth.

The Central Bank provided no explicit forward guidance on the future direction of interest rates. Nonetheless, in subsequent comments to the press, Governor Glapinski said that rate cuts will not begin before 2026. In line with this, almost all of our panelists expect interest rates to remain unchanged this year. Weaker-than-expected inflation is a downside risk. The Bank will meet next on 3–4 September.

ING analysts said: “The NBP Governor's continued, indeed more hawkish rhetoric provides an additional argument for a stronger zloty. Added to that rhetoric is, among other things, the prospect of further EU fund inflows. […] We still think there is a scope for NBP rate cuts next year after CPI inflation peaks in the first half of 2025, but the chances are getting lower.”

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