Poland Continues Cutting Key Interest Rate as Expected

The National Bank of Poland (NBP) cut its benchmark rate by 25 bps to 4.75% at its August 2–3 meeting, following the same 25 bp cut in July, in line with market expectations. The Lombard and deposit rates were reduced to 5.25% and 4.25%, respectively. The decision was driven by persistently weakening inflation, with headline CPI slowing to 2.8% in August—the lowest since June 2024—and remaining within the central bank’s target range of 2.5% ±1 percentage point. The Polish economy expanded 3.4% year-on-year in Q2 2025, maintaining a stable pace around 3% since Q2 2024. Unemployment rose to 5.4% in July, while wage growth eased to 7.6%, below market expectations. Meanwhile, the draft 2026 budget projects a general government deficit of 6.5%, only slightly below this year’s estimated 6.9%, raising concerns over fiscal policy and weighing on expectations for further monetary easing.