Interest rates in Poland: will we see cuts in 2026?

In July 2026, the Monetary Policy Council (MPC) kept interest rates unchanged, a decision driven by high geopolitical uncertainty in US-Iran relations. This decision, announced on July 8, means the reference rate remains at 5.75 percent. For millions of Poles repaying mortgage loans, this means no relief in monthly debt service costs, and for the economy – a continuation of a defensive strategy where the central bank chooses currency stability over stimulating economic growth.

Foreign exchange market analysts have no illusions about the reasons for this stance. The conflict between Washington and Tehran, which in July entered a phase of heightened rhetoric and real military movements in the Persian Gulf, directly affects the valuation of the zloty. The National Bank of Poland, operating on Świętokrzyska Street, prefers to wait out the period of increased volatility rather than risk weakening the national currency through rate cuts. Any downward move in such unstable conditions could trigger a wave of zloty sell-offs, which would consequently import inflation into Poland—something the MPC is trying to avoid at all costs.

The mechanism of the July decision freeze

Maintaining the reference rate at 5.75 percent is a signal that the Monetary Policy Council has stopped treating cuts as a short-term priority. Just a few months ago, discussions within the Council oscillated around an "autumn quarter," i.e., potential cuts of 25 basis points. Today, those plans have been put on ice. From an economic standpoint, at the current level of inflation and exchange rates, any cut below 5.75 percent would be considered by the market as premature and unjustified by macroeconomic fundamentals.

During the meeting on July 8, 2026, Council members had to consider not only data on the pace of consumer price growth but, above all, external risks. The final statement shows a clear shift in emphasis from the domestic economic situation to global threats. Crude oil, the price of which reacts to every signal from Iran, is becoming the MPC's main adversary. If the cost of a barrel exceeds certain thresholds, inflation in Poland could rebound, which would make current interest rates too low rather than too high. This is a decision-making paralysis resulting from the objective difficulty in forecasting the behavior of global powers.

For institutional investors, the July decision was a clear message: the MPC does not intend to be a "dove" when there is a "hawk" in the commodity markets. The lack of a rate change is also an attempt to stabilize inflation expectations. If the central bank had decided on a cut in July, the market could have interpreted it as a signal that the geopolitical situation is not dangerous, which could have led to an uncontrolled rally in energy prices. The stability of 5.75 percent is therefore the price we pay for avoiding an energy shock.

A geopolitical filter for Polish finances

US-Iran relations have ceased to be a topic only for the foreign sections of newspapers. They have become a hard parameter in the spreadsheets of NBP analysts. The scale of the conflict, involving not only the blockade of trade routes in the Middle East but also potential sanctions on oil suppliers, forces Polish policymakers to be cautious. The zloty, as an emerging market currency, is extremely sensitive to capital flight to so-called safe havens, such as the US dollar or the Swiss franc.

When investors fear war, they sell off risky assets, which include the Polish zloty. A weaker zloty means more expensive imports, and more expensive imports mean costlier fuel, food, and semi-finished products. By keeping rates at 5.75 percent, the MPC is trying to maintain the attractiveness of Polish debt for foreign capital. Higher interest rates mean higher bond yields, which allows money to be "kept" in the country. Without this move, the zloty exchange rate could be several percent lower, which would directly hit consumers' wallets through rising prices of imported goods.

This is a vicious cycle in which the Polish economy has been stuck for a long time. On one hand, we want lower loan installments to boost domestic consumption. On the other – we must protect the value of money against external shocks that we cannot control. In July 2026, the MPC opted for protection, which is a safe move, albeit a politically costly one. There is no room here for maneuvers that could be considered pro-inflationary. Anyone who expected cuts during the summer had to face hard market arithmetic: in wartime conditions, money must be expensive to be stable.

The path from the autumn correction to the July stagnation

It is worth remembering that the current 5.75 percent did not come from a vacuum. In November 2025, the MPC decided on a series of cuts that the market received with optimism. This was the second autumn quarter, meaning a total drop in rates of 50 basis points in a short period. At that time, it seemed that the economy was entering a monetary policy easing cycle that was supposed to last throughout 2026. Borrowers planned their household budgets based on the vision of a gradual decline in WIBOR, and analysts competed in forecasts regarding how low the reference rate would go before the end of the year.

Reality, however, proved more complex. After the November 2025 moves, which were intended to stimulate investment, the economy encountered an inflation barrier. It turned out that domestic demand was still too strong and the labor market too tight to allow for further easing without the risk of overheating. When the escalation of tensions in the Middle East in the spring of 2026 was added to this, hopes for continuing the November cycle were completely buried.

The evolution of interest rates in Poland over the last twelve months is a textbook example of how external factors can thwart internal strategy. Instead of a smooth descent toward the 5.00 percent level, the market stopped at 5.75 percent and has remained there without movement. Moreover, today's forecasts indicate that a return to cuts will not happen before the first quarter of 2027. The market prices the first chance for a downward move only after geopolitical risks subside, which means that for the coming months, holders of variable-rate loans will remain in the same place. This is not a matter of "arming oneself with patience," but a hard calculation based on core inflation forecasts, which still remain above the NBP target.

Borrowers versus capital holders – the balance of the decision

Interest rate stagnation always creates a clear social divide. On one hand, we have borrowers for whom every month with a 5.75 percent rate is a tangible loss in the household budget. A mortgage installment, with a high level of debt, remains a burden that consumes a significant portion of disposable income. For them, the lack of a cut is a decision to further limit spending on durable goods or services.

On the other side of the barricade are savers. For people holding capital in bank deposits and savings accounts, the current MPC decision is beneficial. Maintaining rates means that deposit interest will not fall, which allows for at least partial protection of the real value of money against inflation. On a macroeconomic scale, this is an income transfer mechanism: from the indebted toward those holding cash. NBP policymakers must balance between these two groups, and in the current puzzle of interests, the safety of the banking sector and the stability of deposits weigh more than immediate relief for mortgage holders.

It is worth noting that this polarization is becoming increasingly visible in retail sales data. Private consumption is slowing down because households with loans are against the wall, while households with savings do not show excessive desire to consume, choosing safe deposits. This phenomenon causes the economy to lose momentum, and the MPC is in a bind. Lowering rates could stimulate consumption but simultaneously destabilize the currency. That is why the "lesser evil" is chosen, which is keeping rates unchanged.

The outlook for the fourth quarter of 2026

Looking toward the end of 2026, the market is pricing in a so-called "longer plateau." If the situation between the US and Iran does not improve radically, the chances of any interest rate changes in 2026 are close to zero. Analysts point out that after July 8, 2026, NBP communication became exceptionally sparse. This is a typical tactic of central banks in times of uncertainty: do not make promises that cannot be kept.

The fundamentals of the decision are clear. Inflation in Poland, although no longer as high as in the record years 2022-2023, is still above the target. In the face of external supply shocks (oil, gas, transport costs), the central bank has no room for experiments. The baseline scenario for the second half of the year assumes maintaining the reference rate at 5.75 percent until inflation permanently begins to show a downward trend and geopolitical risks are priced as "low."

For borrowers, this means that budget planning for 2027 should be based on the assumption that the cost of money will remain high. Any forecasts about "cheap credit" should be dismissed for now. The economic reality of 2026 is defined by international tensions, which make monetary policy largely reactive rather than proactive. The Monetary Policy Council is simply reacting to subsequent reports from the world, and these do not give reasons for optimism.

Summary of the market situation

The July 8, 2026, decision of the Monetary Policy Council to leave interest rates at 5.75 percent ends the stage of speculation about rapid monetary policy easing. The main factor determining this move was geopolitical uncertainty in US-Iran relations, which translates directly to the currency and commodity markets. The zloty, remaining under external pressure, forces the NBP to keep the cost of money at a level intended to protect the national currency from excessive depreciation.

For market participants, this means moving into a "wait and see" mode. The coming months will be a period of observation—both of inflation data and the development of the conflict in the Middle East. If nothing happens to radically calm sentiment in global markets, the "high rates for longer" scenario will become the governing fact until the end of the year. Borrowers must come to terms with the current level of installments, while savers can benefit from relatively high deposit interest rates.

In this puzzle, there is no room for a quick exit from the impasse. The MPC has chosen a security strategy, prioritizing macroeconomic stability over immediate support for the credit sector. This is a difficult decision, but in the current reality, the only one possible. The market is no longer pricing in cuts in 2026, which gives borrowers a clear signal: one should not count on any "gifts" from the central bank in the coming months. Stability, although costly, is the foundation upon which the resilience of the Polish economy to external shocks is built.

Questions and answers

Why didn't the MPC cut rates in July 2026?

The MPC refrained from the decision mainly due to high geopolitical uncertainty in US-Iran relations, which generates risks for the zloty exchange rate and commodity prices. Maintaining the reference rate at 5.75 percent is intended to protect the economy from imported inflation.

Will my loan installments increase?

Keeping interest rates unchanged means that the interest on loans based on the WIBOR rate will not change suddenly. Installments will remain at the current level until the market situation or the Council's decision changes.

When can we expect further decisions on cuts?

Current market forecasts indicate that room for interest rate cuts may open up only in the first quarter of 2027, provided that tensions in the Middle East subside and core inflation falls permanently.

Sources

Article prepared by the Wiadomości PRO editorial team with the support of artificial intelligence. Facts are derived from the sources listed above.