Poland’s Central Bank Bets on Patience as Geopolitical Risks Linger

Warsaw’s policymakers have drawn a line. The National Bank of Poland will likely keep its key interest rate at 3.75% through the end of 2026 and possibly into March 2027. That stance, voiced clearly by council member Ludwik Kotecki, reflects caution after months of calibrated easing and fresh worries from the Middle East.

Kotecki’s Signal Comes at a Delicate Moment

The comments land as inflation has surprised on the downside. May’s reading fell to 3.1%. That beat forecasts of 3.6%. Core pressures stayed contained. Yet fuel-price caps are set to expire. Administrative shifts could nudge headline figures higher. Kotecki called any such bump “purely an administrative issue.” He urged calm.

“The Monetary Policy Council is unlikely to change interest rates until at least the end of the year, and perhaps even until March of next year, when base effects will bring the annual inflation rate down,” he told Bloomberg News. Short. Direct. Markets took note.

And the recent interim agreement between the US and Iran to reopen the Strait of Hormuz adds a layer of relief. It limits the expected hit to Polish prices and output. “Gives cause for optimism regarding the relatively limited impact of the conflict in the Middle East on both inflation and economic growth in Poland,” Kotecki said. Optimism, yes. But not enough to shift policy yet.

The council cut rates by 200 basis points between May 2025 and March 2026. That brought the reference rate to its current 3.75% level. It marked the lowest in four years. June’s decision to hold for a third straight month followed that easing cycle. Data from Trading Economics confirms the pattern. The bank has stayed put since March even as neighboring eurozone authorities eyed hikes.

Governor Adam Glapinski has walked a similar path. In March he highlighted inflation holding near target despite the Iran conflict. A Wall Street Journal report from that period captured his confidence. The NBP acted then while others paused. Now the message has hardened. No signal for cuts. No rush to tighten. Wait. Observe. Assess.

Recent analysis from ING echoes this view. Its economists project rates unchanged at least until the end of 2026. They cite anchored household expectations and moderating consumption growth. Demand constraints appear to be blunting second-round effects from energy costs. Reuters quoted Glapinski in May saying the bank stood ready to act but would take its time. The governor noted better starting conditions than during the previous inflation surge.

Yet risks remain. Expansionary fiscal policy. Wage momentum. Commodity swings. The council’s 10 members see value in patience. Kotecki said the panel grew somewhat less inclined to raise rates than a month earlier. Still, hikes were never the base case. This nuance matters for investors pricing Polish assets. The zloty has held relatively steady. Bond yields reflect the hold-steady narrative.

Earlier projections tell part of the story. The bank’s March 2026 inflation and GDP forecast assumed constant rates. It showed price growth staying within the 1.5% to 3.5% target band for much of the period. Growth, while slowing in early 2026, avoided sharp contraction. NBP’s own site lists the current reference rate at 3.75%, effective since March 5, 2026. Lombard, deposit, and other corridor rates sit accordingly higher and lower.

But. The Iran war introduced fresh uncertainty. Oil prices spiked. European peers adjusted expectations. Poland chose to ease in March anyway. That move defied the regional trend. Glapinski later acknowledged that higher energy costs, if sustained, could add short-term pressure. The council responded by monitoring incoming data rather than preempting with signals.

So the current posture feels measured. Hold through year-end. Reassess in the new year when base effects kick in. Avoid telegraphing cuts that might fuel demand or loosen financial conditions too soon. Kotecki’s Bloomberg interview reinforces that discipline. “This is not a moment to signal a return to rate cuts,” he added. The best strategy, in his words, is to watch how Middle East events play out for Poland.

Market pricing has aligned. Forward contracts and analyst surveys from earlier this year pointed to limited further easing. Some saw the rate settling around 3.50% or 3.25% by late 2026. Recent ING notes suggest the governor leans toward the higher end of that range. The central forecast keeps policy restrictive in real terms. Positive real rates help anchor expectations.

Poland’s experience stands apart from larger neighbors. The NBP began its easing earlier. It delivered seven cuts since mid-2025. Inflation returned to target range by late 2025. Wage growth moderated. Consumption slowed from 4.3% in late 2025 to 3.3% in the first quarter of 2026. These dynamics bought the bank time. The May inflation surprise bought even more.

Still, the council rejects complacency. Geopolitical developments could shift supply chains or commodity flows at any time. Fiscal expansion adds another variable. The bank’s July projection, when released, may offer fresh numbers on these fronts. Until then, the message stays consistent. Steady policy. Data dependence. No premature pivots.

Investors and corporates in Central Europe watch closely. Borrowing costs at 3.75% support activity without overheating demand. A stable zloty limits imported inflation. Households keep inflation expectations in check. These factors reinforce the case for holding course. Kotecki’s comments crystallize what insiders suspected. The pause could last longer than some anticipated.

The central bank’s approach reveals a refined judgment. It eased aggressively when inflation fell. It now resists both tightening and further loosening amid external shocks. That balance reflects lessons from the prior cycle. Better prepared this time. More room to maneuver. Yet the council refuses to declare victory and move on.

Markets will test this resolve in coming months. Any sustained rise in core prices or acceleration in wages could reopen the debate. A swift resolution in the Middle East might ease pressures further. Either way, Polish officials signal they will not be hurried. The rate stays where it is. For now. And quite possibly well into next year.