NBP interest rates in July 2026: Why is the MPC not cutting costs?

The MPC kept interest rates unchanged at 5.75 percent in July 2026, justifying the decision by the need to stabilize the zloty in the face of the escalating US-Iran conflict. This decision ends a period of speculation about a possible easing of monetary policy and closes the door to debt servicing cost cuts in the near future. The Monetary Policy Council concluded that the priority is to protect the national currency from volatility caused by tensions in the Middle East, which for millions of borrowers means the necessity of continuing to pay installments at rates that have persisted for many months.

Monetary policy transmission mechanism in the face of uncertainty

Maintaining the reference rate at 5.75 percent is not merely an expression of caution, but the result of an analysis of the monetary policy transmission mechanism under conditions of elevated external risk. The central bank operates by influencing market interest rates, the most important of which for borrowers is WIBOR. The current MPC strategy consists of maintaining the cost of money at a level that effectively limits demand pressure while preventing the flight of foreign capital from the Polish market. At a time when investors are seeking safe havens, capital flows toward the dollar or the Swiss franc, which automatically weakens the zloty.

The weakening of the national currency is a direct threat to the NBP's inflation target. Imported goods, especially energy commodities, become more expensive, which translates into higher production costs and final prices of goods in stores. The MPC concluded that in the face of the escalating US-Iran conflict, any rate cut would be interpreted by financial markets as a signal of capitulation to inflationary pressure. Such an interpretation would lead to a sharp depreciation of the zloty, which would quickly negate any benefits resulting from cheaper credit. This mechanism is rigid – without currency stability, the fight against inflation becomes impossible.

The decision of July 8, 2026, is an expression of choosing the lesser of two evils. On one hand, we have the household sector, burdened with high mortgage installments, and on the other – the necessity of maintaining macroeconomic stability. The Council opted for stability, pushing back the moment when money will become cheaper. The lack of market consensus regarding the date of the first rate cut is becoming increasingly visible in interest rate futures valuations, where investors are systematically pushing back the dates of expected changes in monetary policy.

Concrete cost for the borrower: how much are we losing at 5.75 percent?

Market valuation before the July meeting assumed that the MPC would decide on a 25 basis point rate cut, i.e., to the level of 5.50 percent. It is worth analyzing what this difference means in practice for the average borrower. Taking as a reference point a mortgage loan of 500,000 zlotys, taken for a period of 25 years, with a bank margin of 2.0 percent, the difference in the monthly installment is measurable.

At a reference rate of 5.75 percent and taking into account the WIBOR 3M index (which follows MPC decisions), the loan interest rate is approximately 7.75 percent (5.75 percent base rate plus 2.0 percent margin). The monthly installment of such a loan is approximately 3,810 zlotys. If the MPC had decided on a 25 basis point cut, the interest rate would have fallen to 7.50 percent. In that case, the monthly installment would be approximately 3,706 zlotys. The difference in the borrower's wallet is therefore about 104 zlotys per month for every 500,000 zlotys of debt. On an annual scale, this means over 1,200 zlotys in savings that have been frozen by the Council's decision.

For people with larger loans or shorter repayment periods, this difference is even more severe. It should be remembered that the WIBOR index anticipates MPC decisions, however, in the current situation, where the market did not expect a downward move, it remains anchored around 5.75 percent. Borrowers are therefore in a situation where their debt servicing costs are directly dependent on geopolitical events over which they have no influence. The lack of an expected 25 bp rate cut is not only the loss of a chance for a cheaper installment, but above all the necessity of maintaining high reserves in household budgets for longer, which limits current consumption.

Geopolitics as a determinant of monetary policy

The escalation of the conflict between the US and Iran has ceased to be merely a topic for agency dispatches, becoming the main parameter of the equations used by the MPC. Experts from the Polish Economic Institute point out that every piece of information about rising tension in the Persian Gulf region causes an immediate reaction in global commodity markets. The price of crude oil, which is key to producer inflation in Poland, shows high sensitivity to reports of possible blockades of sea straits or attacks on critical infrastructure.

In the face of these phenomena, the central bank is forced to conduct a defensive policy. The zloty, as an emerging market currency, is particularly vulnerable to capital outflows during times of increased risk aversion. When reports of an intensified conflict appear in the media, investors sell off assets denominated in zlotys, which forces the NBP to maintain relatively higher interest rates to encourage keeping capital in Poland. This is a classic dilemma between economic growth and currency stability.

XTB analysts point out that in the current reality, any attempt to loosen monetary policy that was not supported by an improvement in the situation in the Middle East would be perceived as a strategic error. The market would then price in a drop in real interest rates, which, given high imported inflation, would lead to further depreciation of the zloty. In this way, the MPC falls into a trap – on one hand, the economy needs an impulse, on the other – the external geopolitical situation sets rigid barriers that cannot be crossed without the risk of serious financial destabilization of the country.

Industry and energy in the face of expensive capital

Maintaining interest rates at 5.75 percent hits not only individual borrowers but, above all, the industrial sector. Polish companies planning investments in energy transformation are colliding with the barrier of the cost of capital. An investment loan that would be profitable at lower rates becomes too expensive at current costs to justify the return on investment in the short or medium term.

This is particularly painful for energy-intensive enterprises. In conditions where energy prices are strongly dependent on global commodity prices, and these in turn on the US-Iran situation, companies must look for savings within the organization. High interest rates, however, limit the possibilities of financing modern technologies that could permanently reduce electricity consumption. We are dealing with a vicious circle: the lack of cheaper capital blocks investments that could reduce the industry's sensitivity to energy shocks.

It is worth noting that in the balance sheets of listed companies, the costs of external financing are beginning to play an increasingly important role. In previous quarters, many companies managed to maintain margins through operational optimization, but with persistently high rates, the pressure on profitability will grow. Banks do not intend to lower credit margins because credit risk remains elevated in conditions of geopolitical uncertainty. Entrepreneurs who were counting on cheaper money in the second half of 2026 must now revise their investment plans. Many projects that were supposed to start in the third quarter have been frozen until the situation in the Middle East is clarified.

Prospects: when will there be real relief?

Forecasts regarding the interest rate path in the second half of 2026 have been thoroughly revised. As recently as April 2026, the market was convinced of an upcoming cycle of cuts, which resulted from data on the slowdown of core inflation. However, the July MPC meeting showed that external factors can dominate the national macroeconomic agenda within a few weeks. Currently, most analysts point out that reaching an optimal level that would allow for stimulating the economy without inflationary risk will happen at the earliest at the end of 2026.

This is a pessimistic scenario for the banking sector and borrowers, who have already had to shift their expectations many times. The key factor remains the dynamics of the US-Iran conflict. If the situation in the Middle East stabilizes, the MPC will certainly return to the discussion about cuts. If, however, there is an escalation, interest rates may remain at the current high level for an even longer time.

It is worth emphasizing that the MPC does not act in isolation. Analyses prepared for members of the Council include not only data from Statistics Poland (GUS) but also predictions regarding energy commodity prices. In this context, 5.75 percent is a level that, in the opinion of decision-makers, ensures the security of the financial system. It is not a level that supports rapid GDP growth, but it is a level that protects against a currency crisis scenario. The reader must prepare for the fact that monetary policy in the coming months will be a hostage to events thousands of kilometers from Poland, and every change in NBP communication will reflect the situation on global commodity exchanges.

Questions and answers

Why is the MPC not lowering interest rates even though the economy is slowing down?

The Monetary Policy Council believes that in the current geopolitical conditions, the stability of the zloty is a higher priority than short-term growth stimulation. Cutting rates with a weak zloty could trigger a wave of imported inflation, which would permanently destabilize prices.

How much do I actually lose from the lack of a 25 bp cut?

With a mortgage loan of 500,000 zlotys, the difference in the monthly installment between a 5.75 percent rate and a 5.50 percent rate is about 104 zlotys. On an annual scale, this is over 1,200 zlotys that remain in the bank instead of in the household budget.

Does the situation in the Middle East have a direct impact on my loan?

Yes, it is currently one of the key factors influencing MPC decisions. The escalation of tensions between the US and Iran drives up energy commodity prices and affects the valuation of the zloty, which forces the central bank to maintain higher interest rates.

When can the first cuts be expected?

Current forecasts indicate that the path to interest rate cuts may open at the earliest at the end of 2026, provided that the geopolitical situation improves significantly and commodity prices stabilize.

Can companies count on cheaper capital this year?

Prospects for the industrial sector are difficult. The high cost of capital, resulting from the MPC's decision, is hampering investment, and banks show no willingness to lower margins in conditions of macroeconomic uncertainty. Most companies planning modernization must postpone these decisions until 2027.

What does "monetary policy transmission mechanism" mean for the average citizen?

It is the process in which changes in NBP interest rates affect the interest rates on deposits and loans in commercial banks as well as the exchange rate of the zloty. Maintaining high rates by the NBP means that money remains expensive, which is intended to limit the purchase of goods and services, and thus slow down price growth in the country.

Sources

Article prepared by the Wiadomości PRO editorial team with the support of artificial intelligence. Facts come from the sources provided above.