Poland's Central Bank at a Crossroads: Rate Cut or Hold?

Traders are learning to ignore the official commentary from the National Bank of Poland (NBP). After a history of inconsistent messaging, the market is focused on economic data to predict the central bank's next move, not its governor's statements.

At the January press conference, Governor Adam Glapiński confirmed this reality, stating that monetary policy decisions are made month-by-month and are strictly dependent on incoming data. This has left economists divided ahead of the February meeting, as recent figures present a conflicting picture.

The Case for Holding Rates Steady

Recent macroeconomic data provides a strong argument for the NBP to maintain its wait-and-see approach. Several key indicators have surprised to the upside:

• Stronger Economic Activity: Both manufacturing and construction figures for December were much stronger than expected, suggesting economic growth is becoming more broad-based.

• Impressive GDP Growth: The full-year 2025 GDP growth was estimated at 3.6%, which implies an economic expansion of around 4% year-on-year in the fourth quarter.

• Robust Wage Dynamics: December wage growth also beat expectations. While driven partly by annual bonuses in sectors like mining, the reading broke a downward trend seen in previous months.

These figures make it difficult to justify a rate cut and suggest the Polish economy is carrying significant momentum.

The Argument for an Imminent Rate Cut

Despite the strong activity data, the primary argument for resuming rate cuts is the inflation outlook. According to internal estimates, year-on-year inflation in January likely fell below 2%.

It is possible that the NBP's own staff forecasts, presented to the Monetary Policy Committee (MPC), show a similar trend. This could create a compelling case for a rate cut in February, even before the official January CPI data is released or the central bank publishes its updated March inflation projection.

Our Outlook: A February Pause, Followed by Cuts

Our baseline scenario is that the NBP will keep interest rates unchanged this week. The strong economic data released recently makes a rate cut difficult to defend. Furthermore, the absence of an official January CPI reading gives policymakers a clear reason to wait for more information to confirm that disinflation is continuing alongside the economic recovery.

The MPC will likely seek more clarity on whether wage and core inflation pressures will continue to ease throughout 2026 before acting.

However, we still expect the next cut to occur in March, with further easing to follow in the subsequent months. We see the terminal NBP rate reaching 3.25% this year, and potentially even lower if the inflation outlook improves beyond our current forecasts. We project that CPI will hover near the lower bound of the NBP's target range of 2.5% (+/-1%) in 2026, and a series of low inflation reports should be enough to trigger further rate cuts from the central bank.