Poland's Central Bank and the Path of Monetary Easing in 2026

The National Bank of Poland (NBP) faces a delicate balancing act in 2026 as it navigates the interplay between disinflationary pressures and rising fiscal risks. After a series of rate cuts in the second half of 2025, the central bank has signaled a cautious approach to further monetary easing, with inflation now firmly below its 2.5% target. However, persistent fiscal challenges-including a widening deficit and surging public debt-complicate the outlook for policy normalization. Investors and analysts are closely watching how the NBP reconciles these competing forces, as the path of rate cuts in 2026 could shape Poland's economic trajectory and investor sentiment.

Inflation Trends and the Case for Further Easing

Poland's inflation trajectory has shifted decisively in 2025, with year-on-year (YoY) inflation falling to 2.4% in December 2025-a level below the NBP's 2.5% target and a key catalyst for recent rate cuts. This decline reflects a broader disinflationary trend, driven by slowing energy and non-energy industrial goods prices, as well as subdued consumer demand in certain sectors. The Monetary Policy Council (MPC) responded with a 25-basis-point (bp) rate cut in October 2025, bringing the reference rate to 4.50%, and analysts now anticipate three additional 25bp cuts in 2026, potentially reducing the terminal rate to 3.25%.

Governor Adam Glapiński has emphasized a "wait-and-see" stance, acknowledging that inflation remains within the target range but cautioning against overreacting to short-term volatility. However, the MPC's inflation projections suggest that disinflationary pressures will persist, with inflation expected to stay below 2.5% for much of 2026. This creates a strong case for continued easing, particularly if the December 2025 CPI reading of 2.4% proves to be the peak. As one analyst noted, "The NBP's data-dependent approach means it will likely follow the disinflation signal, but the pace of cuts will hinge on how quickly inflation anchors to the target."

Fiscal Risks and the Shadow of Debt

While the NBP's focus on inflation is clear, rising fiscal risks could constrain its ability-or willingness-to ease aggressively. Poland's general government deficit is projected to widen to 6.8% of GDP in 2025, driven by elevated defense spending and debt servicing costs. Public debt, already at 55.1% of GDP in 2024, is expected to rise to 69.2% by 2027, with the IMF warning of a potential 70% threshold by 2030 if fiscal consolidation measures fall short. These dynamics create a challenging backdrop for monetary policy, as higher debt levels increase the sensitivity of the economy to interest rate changes and inflation shocks.

The NBP is acutely aware of these risks. In its December 2025 policy statement, Governor Glapiński highlighted the need to "maintain price stability while monitoring the fiscal sustainability of the government's spending plans." This dual mandate complicates the central bank's calculus: while lower rates could stimulate growth and support debt servicing, they also risk reigniting inflation if fiscal expansion outpaces economic capacity. The IMF has noted that Poland's fiscal deterioration-partly offset by EU funding through the Recovery and Resilience Facility-poses a medium-term risk of sovereign debt stress, which could indirectly pressure the NBP to adopt a more hawkish stance.

The Interplay of Policy and Market Expectations

The NBP's 2026 policy path will likely be shaped by three key factors: the persistence of disinflation, the trajectory of fiscal consolidation, and external economic conditions. Market pricing currently reflects a 35% probability of a rate cut in January 2026, with cumulative cuts of 75bps expected by year-end. However, this outlook assumes a continuation of the current disinflationary trend and a stable fiscal environment. If inflation surprises to the upside-particularly in the service sector, where price growth remains stubborn-the NBP may pause or even reverse its easing cycle. Conversely, a sharper-than-expected fiscal adjustment, such as a successful implementation of temporary tax hikes or spending cuts, could free up monetary space for more aggressive rate reductions.

External factors also play a role. Poland's economy is increasingly integrated with the eurozone, and diverging monetary policies in the European Union could create cross-border capital flows that influence domestic inflation. For instance, if the European Central Bank (ECB) signals a pause in rate cuts, the NBP may feel less pressure to act quickly, allowing it to prioritize fiscal stability over rapid normalization.

Conclusion: A Cautious Path Forward

Poland's 2026 monetary policy outlook is best characterized by caution and conditional easing. The NBP has demonstrated a willingness to cut rates in response to disinflation, but its actions will remain contingent on fiscal developments and inflation dynamics. Investors should prepare for a gradualist approach, with rate cuts likely to be modest and spaced out to avoid undermining fiscal sustainability. The central bank's ability to balance these competing priorities will be critical in determining whether Poland's economy can navigate its current challenges without sacrificing long-term stability.

As the MPC meets in early 2026, the focus will be on whether the December 2025 CPI reading of 2.4% signals a durable disinflationary trend-and whether the government can credibly commit to fiscal discipline. For now, the NBP's "wait-and-see" stance suggests that the path of least resistance is a measured easing cycle, with the terminal rate likely to settle around 3.50% by year-end.