Zarzecski: Poland may cut rates later in 2026 when tensions ease

Zarzecski: Poland may cut rates later in 2026 when tensions ease

The National Bank of Poland (NBP) cut its benchmark interest rate by 25 basis points to 3.75% in March 2026, marking its first reduction of the year amid subdued inflation and geopolitical uncertainty. The decision aligns with earlier signals from central bank officials, including MPC member Piotr Zarzecki, who had suggested March could be a suitable timing for easing monetary policy. However, policymakers emphasized that further cuts remain contingent on the resolution of ongoing geopolitical tensions, particularly the U.S.-Israeli strikes on Iran, which have introduced significant uncertainty into inflation and growth forecasts.

Annual headline inflation in Poland fell to 2.2% in January 2026, the lowest level in nearly two years and within the NBP's target range of 1.5–3.5%. Despite this, upside risks persist, including elevated energy prices and robust wage growth, which could pressure inflation above the 2.5% target. MPC member Henryk Wnorowski stated that additional rate cuts are unlikely until the conflict in the Middle East subsides, as prolonged instability could disrupt economic activity and inflation expectations.

The NBP's March staff projections highlight a path of disinflation but caution that geopolitical shocks, such as the oil price surge linked to the Iran strikes, may temporarily elevate headline inflation. While the central bank remains committed to its inflation mandate, it acknowledged that the evolving security environment complicates near-term policy decisions. Governor Adam Glapiński noted that the conflict's duration and impact on global markets remain critical variables for future rate adjustments.

With inflation trending downward and growth momentum moderating, the NBP's next move will depend on whether geopolitical tensions abate, potentially opening the door for further easing later in 2026.