The National Bank of Poland (NBP) cut its reference interest rate by 25bp to 4.75% on September 3, in line with market expectations.

The move, which the NBP described as an “adjustment” in what analysts say was an attempt not to set expectations for further moves, followed two earlier reductions, totalling 75bp, in May and July.

The central bank said the decision reflected easing inflation, though it pointed to fiscal policy, recovering consumption demand and elevated wage growth as continuing risk factors.

“Uncertainty stems also from the level of administered energy prices and inflation developments abroad, following, among other things, from changes in trade policies of major economies,” the NBP also said.

Headline inflation eased to 2.8% y/y in August from 3.1% y/y in July, with core inflation also declining, while services prices remained elevated, the NBP noted.

GDP growth accelerated to an unadjusted 3.4% y/y in the second quarter, compared with 3.2% in the first quarter, driven mainly by household spending. Seasonally adjusted growth slowed to 3% y/y from 3.7% in January–March. By any measure, Poland's economy belongs to the fastest-growing in the EU.

“Taking into account inflation developments, in the Council’s assessment, it became justified to adjust the level of the NBP interest rates. Further decisions of the Council will depend on incoming information regarding prospects for inflation and economic activity,” the central bank said.

“NBP will continue to take all necessary actions in order to ensure macroeconomic and financial stability, including above all to keep inflation at the level consistent with the NBP inflation target in the medium term. NBP may intervene in the foreign exchange market,” it said.

Analysts say the NBP’s current cycle of rate cuts could end with another move in November.

“In the baseline scenario, we assume one more cut by the end of the year, in November, when the NBP reviews new inflation and GDP projections,” PKO BP said in a note, predicting another 25bp reduction to 4.5%.

“Among the macroeconomic fundamentals, arguments for a reduction include favourable inflation prospects, ongoing normalisation of wage pressure, as well as a strong złoty,” PKO BP also said.

Bank Millennium highlighted fiscal policy risks, evident in the governmnt's draft budget for 2026.

"This year, the general government deficit will also be higher than previously assumed, possibly rising to 6.9% of GDP. Keeping fiscal policy loose increases the risk to the scenario of further interest rate cuts,” Bank Millennium said.

“Nevertheless, taking into account the return of inflation to the NBP target, we maintain our scenario of the reference rate falling to 4.5% by the end of this year and to 3.5% by the end of 2026,” Bank Millennium also said.