Polish Central Bank Maintains Interest Rates Despite Persistent Inflation
Monetary policy remains unchanged as inflation continues to exceed the official target range.
1Monetary Policy Stays Steady
The Monetary Policy Council decided to maintain interest rates at their current levels during the November 2026 meeting. This decision aligns with the expectations of most economists, who anticipated no changes despite CPI inflation consistently exceeding the National Bank of Poland's 2.5 percent target. Borrowing costs remain at a four-year low.
2Inflation Trends and VAT
October CPI inflation reached 3.5 percent, down from 4.1 percent in September, largely due to temporary VAT reductions on fuel. However, this remains above the central bank's target. Projections suggest inflation will hover between 3.5 and 4.0 percent through the end of 2026, with potential increases expected starting in January 2027.
3Real Interest Rate Dynamics
Since March, the reference rate has been at its lowest level in four years, following a cumulative 200 basis point reduction over the previous fourteen months. As of September, the reference rate fell below the annual CPI inflation rate. Consequently, real interest rates are currently near zero, shifting policy toward an expansive stance.
4Economic Growth Projections
The latest November projections from the Department of Economic Analysis indicate GDP growth will likely fall within a 1.9 to 3.8 percent range for 2027. These forecasts were prepared using the NECMOD model, assuming interest rates remain unchanged and incorporating data available up to October 15, 2026, to assess future economic performance.
5Key Risk Factors Identified
The Council highlighted several risks that could hinder the return of inflation to the target. Primary concerns include energy price regulations, fiscal policy adjustments, and persistent wage pressure. Furthermore, geopolitical tensions, particularly the ongoing conflict in the Middle East, continue to drive volatility in global commodity prices, impacting the domestic economic outlook.
6Industrial and Labor Indicators
Third-quarter GDP growth slowed compared to the 4.1 percent year-on-year increase observed in the second quarter. While retail sales and industrial production showed growth in September, the construction and assembly sector experienced a decline. Additionally, corporate employment continues to shrink despite the ongoing momentum in wage growth across the national economy.
7Core Inflation Developments
Beyond the headline CPI, the central bank estimates that core inflation also decreased in October from the 3.1 percent year-on-year rate recorded in September. The Council remains prepared to intervene in the foreign exchange market if necessary to maintain stability, though no immediate changes to the current monetary framework were announced this week.
8Future Policy Outlook
Market participants now look toward the upcoming press conference by NBP President Adam Glapiński for further guidance on future policy direction. The final decision-making meeting of the Monetary Policy Council for 2026 is scheduled for December 1-2. Analysts generally expect no further adjustments to interest rates before the end of the year.