Poland’s Rate Cut: A Pause, Not a Pivot?

The National Bank of Poland (NBP) made headlines in May 2025 by cutting its reference rate by 50 basis points to 5.25%, its first easing move since October 2023. Yet, Governor Adam Glapiński was quick to clarify that this decision did not signal the start of a full-fledged easing cycle. Instead, it marked a cautious recalibration in response to evolving economic conditions. For investors, understanding the nuances of this shift—and the NBP’s forward guidance—is critical to navigating Polish markets in the coming quarters.

Inflation Dynamics: The Catalyst for Easing

Poland’s inflation trajectory has been a central driver of the NBP’s policy shift. Year-on-year inflation fell to 4.2% in April 2025, down from 4.9% in Q1, as downward revisions to the inflation basket and a high base effect from a 2024 VAT hike on food prices took hold. The NBP now projects inflation to drop to 3.5% by Q3 2025, 0.5 percentage points below its March forecast.

This improvement, coupled with expectations of further declines, has given the NBP breathing room. However, Governor Glapiński emphasized that risks remain. Energy price fluctuations and fiscal policies—such as plans to stabilize household energy costs by late 2025—could influence the pace of disinflation. The NBP’s cautious tone reflects its awareness that premature easing could jeopardize its inflation target of 2.5% ±1 percentage point.

Economic Softness and Wage Growth: A Mixed Picture

Slowing wage growth and muted economic activity also factored into the rate decision. Enterprise-sector wage growth eased to 7.7% year-on-year in March 2025, though it still outpaced productivity gains. Meanwhile, Q1 2025 GDP growth missed expectations, with industrial production and retail sales lagging behind forecasts. The NBP acknowledged this moderation but stressed that the economy remains resilient, avoiding overt pessimism.

The central bank’s challenge lies in balancing support for growth with its inflation mandate. While the economy shows no signs of a sharp downturn, the NBP’s decision to pause in June underscores its reluctance to overreact to short-term data.

Forward Guidance: Data-Dependent, but Gradual

The NBP’s May statement included several key forward-looking signals:
- June Pause: No further cuts are expected in June, with the next potential move likely in July following updated inflation data.
- Smaller Increments: Future adjustments are projected to be 25 basis points, reflecting a deliberate slowdown from the May 50-basis-point move.
- Long-Term Outlook: The NBP anticipates the reference rate will fall to 4.5% by year-end 2025 and 3.75% by end-2026 under its baseline scenario.

The governor’s emphasis on “real ex ante interest rates”—now at their highest since 2015—explains the room for easing. These rates, which factor in expected inflation, suggest monetary policy remains restrictive, even as nominal rates decline.

Market Implications: Caution and Strategic Positioning

Investors should approach Polish assets with a granular lens. While the rate cut reduces borrowing costs for businesses and households, the NBP’s reluctance to embark on aggressive easing limits the upside for bond markets.

Equity investors might find opportunities in sectors sensitive to interest rate cycles, such as real estate or consumer discretionary, but should monitor economic data closely. Meanwhile, the zloty’s recent volatility—driven by policy uncertainty and external factors like U.S. monetary policy—adds a layer of risk for forex traders.

Analysts at Capital Economics note that the NBP’s data-driven approach could lead to pauses or smaller cuts if inflation surprises to the upside. “This is a cycle of measured steps,” says one economist, “not a race to the bottom.”

Conclusion: A Gradual Path, Not a Free Fall

Poland’s May rate cut is best viewed as a tactical adjustment rather than the start of a broad easing cycle. With inflation on track to meet targets sooner than expected and economic growth showing resilience, the NBP has room to ease—but it will do so cautiously.

The central bank’s projections—4.5% by year-end 2025 and 3.75% by 2026—rely heavily on stable energy prices and fiscal discipline. Should either factor falter, the timeline could shift. For now, investors should prioritize flexibility: maintaining exposure to rate-sensitive sectors while hedging against external shocks.

The NBP’s pivot to a more dovish stance since March 2025 reflects its confidence in the inflation outlook, but the “data-dependent” mantra means each subsequent decision will hinge on granular metrics. In this environment, patience—and a close eye on Polish GDP, wage, and inflation reports—will be key to success.

In summary, Poland’s monetary policy is entering a new phase, but it is neither a return to loose money nor a green light for aggressive bets. For investors, the path ahead is gradual—and the NBP’s next moves will be as much about what it doesn’t do as what it does.