Poland Poised to Hold Rates at 3.75%

Poland's central bank is expected to keep its benchmark interest rate at 3.75% on September 9 after August inflation jumped to 3.4%, the highest level in 14 months. The acceleration has all but eliminated the prospect of the September rate cut that Governor Adam Glapiński had floated during the summer, with price growth now just 0.1 percentage point below the top of the National Bank of Poland's tolerance range.

Markets had spent much of the summer assessing whether Poland could resume monetary easing after the break. That outlook has changed sharply. Bloomberg reported that higher fuel prices have driven inflation close to the upper boundary of the central bank's target range, making another reduction increasingly difficult to justify.

An unchanged rate is now the dominant expectation for September. Attention is shifting from the decision itself to the central bank's guidance on how long borrowing costs may remain at current levels.

Polish inflation rises to 3.4%

Consumer prices increased 3.4% from a year earlier in August and 0.4% from July, according to the flash estimate from Statistics Poland.

Annual inflation had been 3.0% in July, meaning the rate accelerated by 0.4 percentage point in a single month. The result was also well above a market consensus of about 3.1%.

Poland's central bank targets inflation at 2.5%, allowing fluctuations of one percentage point on either side. That puts the upper end of the range at 3.5%, only marginally above the August reading.

The increase was not evenly distributed across the consumer basket. Fuel accounted for much of the acceleration.

Fuel prices drive the inflation surprise

Analysis by ING shows that fuel prices rose 5.2% from July and 24.2% from a year earlier, accelerating from a 15.8% annual increase in July. Food prices, by contrast, were 0.9% lower than a year earlier.

ING estimated core inflation, which strips out volatile food and energy prices, at around 3.2% to 3.3% in August, compared with 3.1% in July.

There is also an important statistical complication. Poland temporarily reinstated a reduced value-added tax rate on fuel in the second half of August, lowering it to 8% from 23%. Some of the resulting decline in pump prices may have occurred after the period used for the preliminary price collection, meaning the headline August reading could overstate the persistence of the fuel shock.

For policymakers, however, the main concern is whether higher energy costs spread into transport, production and services. Such second-round effects would make the inflation increase more persistent.

Poland stopped cutting rates in March

The Monetary Policy Council reduced the NBP reference rate by 25 basis points in March, taking it from 4% to 3.75%. The National Bank of Poland's March statement also set the lombard rate at 4.25%, the deposit rate at 3.25%, the rediscount rate at 3.80% and the discount rate at 3.85%.

The reference rate has remained unchanged since then, including at the April, May, June and July meetings.

Glapiński had suggested in July that he could propose a 25-basis-point reduction after the summer. Reuters reported at the time that other council members were considerably more cautious about the idea.

The August inflation data have strengthened the case for waiting. Cutting rates while inflation sits just below the upper limit of the target range would amount to easing policy at a time when price risks have increased.

Poland's economy continues to expand

Economic growth also gives the central bank little reason to rush. Poland's real gross domestic product expanded by 3.9% year on year in the second quarter of 2026, according to the revised estimate from Statistics Poland.

On a seasonally adjusted basis, GDP grew 1.0% from the previous quarter and 3.8% from a year earlier. The earlier flash estimate had put unadjusted annual growth at 3.8%, so the subsequent reading was revised 0.1 percentage point higher.

Growth close to 4% combined with inflation near the upper end of the central bank's range weakens the case for additional monetary stimulus. Poland is not facing the combination of weak demand and low inflation that would normally place greater pressure on policymakers to reduce borrowing costs.

Inflation risks extend beyond September

Monetary Policy Council member Iwona Duda said in early September that her baseline scenario was for rates to remain unchanged at least through the end of 2026. Risks include fuel prices, fertilizer costs and fiscal policy, according to a summary of her Bloomberg interview published by Investing.com.

Duda said there was no immediate need for monetary tightening, but she also argued that expectations of near-term cuts were not justified while inflation remained elevated.

That marks a significant change from the early-summer debate, when lower inflation had left open the possibility of another reduction before the end of the year.

Higher rates provide support for the zloty

For currency markets, a longer period of unchanged rates helps preserve the yield available on zloty-denominated assets. That can support the Polish currency relative to a scenario in which the central bank resumes rapid easing.

Societe Generale expects the NBP to keep rates unchanged at least until the second quarter of 2027 and sees the euro-zloty rate biased toward the 4.30 area over the coming quarters, according to a research summary published by FXStreet.

Borrowers face the opposite effect. The longer the policy rate stays at 3.75%, the slower financing costs are likely to decline for businesses and households. The impact on individual mortgages depends on the loan structure, bank margin and the benchmark used to set the interest rate.

As International Investment experts note, keeping the reference rate at 3.75% is consistent with an economy growing close to 4% while inflation sits near the top of the central bank's tolerance range. The key uncertainty is whether the August increase is mainly a temporary fuel shock or the beginning of a broader rise in prices. If fuel costs fall and core inflation stabilizes, maintaining restrictive monetary conditions for too long could unnecessarily slow investment and credit growth in 2027. If energy costs spread into services, production and inflation expectations, an early rate cut could instead make the return to the 2.5% target more difficult. The next several inflation readings are therefore likely to matter more for investors than the September decision itself.

FAQ

What is Poland's benchmark interest rate?

The National Bank of Poland's reference rate stands at 3.75%. It has remained at that level since March 2026.

What is Poland's inflation rate in August 2026?

The flash estimate showed consumer prices rising 3.4% year on year and 0.4% from July. The annual rate was the highest in 14 months.

What is the National Bank of Poland's inflation target?

The NBP targets inflation at 2.5% and allows deviations of one percentage point in either direction, producing a tolerance range of 1.5% to 3.5%.

Why did Polish inflation rise so sharply?

Fuel was the main factor. Prices rose about 5.2% from the previous month and 24.2% from a year earlier.

Will Poland cut interest rates in 2026?

The probability has fallen sharply following the August inflation surprise. Several economists and policymakers now expect the 3.75% rate to remain in place through the end of the year.

When could Poland start cutting rates again?

That will depend primarily on inflation returning sustainably toward the 2.5% target, core price pressures and energy costs. Some analysts see the middle or second half of 2027 as a more plausible window for renewed easing.