Poland Central Bank Expected to Hold Rates Amid Inflation Tightrope

Poland’s central bank is poised to pause its rate-cutting cycle in a closely watched decision, as inflation remains stubbornly above target despite signs of economic cooling. The move reflects a delicate balancing act between supporting growth and maintaining price stability.

The National Bank of Poland (NBP) is anticipated to maintain its key policy rate at 5.50% in its upcoming meeting, marking a pause after four consecutive rate reductions totaling 125 basis points since late 2024. This decision comes amid persistent inflation pressures, with the annual consumer price index (CPI) at 4.8% in December 2025, above the NBP’s 2.5% target range and still elevated compared to regional peers. The central bank faces competing signals: while GDP growth slowed to 1.2% in the final quarter of 2025, down from 2.4% in Q3, underlying wage pressures and imported cost increases continue to fuel price expectations. Core inflation, excluding food and energy, stood at 3.9% in December, indicating that inflationary dynamics remain embedded in the economy. These factors are likely to weigh heavily on the NBP’s board, which has signaled a data-dependent approach ahead of the January 2026 policy meeting. Financial markets are pricing in a 60% probability of a hold, with a 30% chance of a cut and 10% of a hike. The Polish zloty (PLN) has weakened slightly against the euro, trading at 4.48 PLN/EUR, reflecting concerns over potential monetary easing. Stock indices, particularly the WIG20, have shown muted reaction, with investors awaiting clearer signals on the NBP’s forward guidance. The decision will impact a broad range of stakeholders, including exporters facing currency volatility, borrowers with variable-rate loans, and households managing rising living costs. The central bank’s credibility hinges on its ability to anchor inflation expectations without stifling economic momentum.