Poland sees no need to extend power price freeze into 2026

Poland sees no need to extend power price freeze into 2026

Poland's government has announced that it will not extend the current power price freeze beyond 2025. This decision comes as the country's central bank, the National Bank of Poland (NBP), prepares to cut interest rates to 4.75% on September 3, the first reduction in over a year [1].

The power price freeze, which has been in effect since 2022, was implemented to mitigate the impact of high energy costs on households and businesses. However, with energy prices declining and inflation easing, the government has determined that the freeze is no longer necessary.

The decision to end the freeze is part of a broader effort to address Poland's fiscal deficit. The government has approved a draft budget for 2026 that includes a record defense spending of 4.8% of GDP, along with increased healthcare spending and a lower budget deficit [2].

The NBP's interest rate cut is expected to support economic activity by reducing borrowing costs for households and businesses. However, the central bank has signaled caution about future moves, citing the need to monitor fiscal developments. The recent revision of the 2025 budget deficit to 6.9% of GDP has raised concerns about potential inflationary spillovers, particularly if the fiscal expansion persists into 2026 [1].

Market reactions to the government's decision to end the power price freeze are expected to be mixed. While the move may provide relief to consumers and businesses, it could also lead to higher energy costs in the short term. The decision is likely to be closely watched by investors and financial professionals.

References:
[1] https://www.ainvest.com/news/poland-cut-rates-inflation-dips-3-2509-36/
[2] https://notesfrompoland.com/2025/08/29/poland-plans-record-defence-spending-of-4-8-gdp-in-2026-budget-along-with-lower-deficit/