Interest rates in 2026: are hikes awaiting us?

In July 2026, the Monetary Policy Council (MPC) kept interest rates at an unchanged level, making future decisions dependent on the escalation of the conflict in the Middle East. This decision definitively ends borrowers' hopes for quick installment cuts in the third quarter of this year. The cost of money in the Polish economy remains in a state of suspension, and the central bank is shifting into defensive mode, where the priority is protecting the value of the currency rather than stimulating economic growth.

The MPC decision of July 2026: stabilization in uncertain times

The meeting of the Monetary Policy Council, which took place on July 8, 2026, brought a result that financial markets had begun to expect a few days before the announcement. Maintaining interest rates at their current level is a signal that members of the Council have abandoned the continuation of the monetary easing cycle that was visible as late as the autumn of 2025. Policymakers explicitly indicated that the macroeconomic environment is no longer favorable for cheaper credit.

From a borrower's perspective, the July announcement is painful. It means that installments on variable-rate loans will not fall, and may even show a tendency to rise slightly if pressure on the zloty persists. In previous quarters, the market priced in an optimistic scenario in which rate cuts would become the norm. Currently, the situation has turned 180 degrees. MPC members have no room for maneuver. Inflation, although still under control, is threatened by factors over which the NBP has no influence.

Experts point to the transmission mechanism. When rates remain high and the economy needs an impulse, commercial banks are reluctant to lower margins. Borrowers are trapped. On one hand, we have the hope for cheaper money, and on the other – the geopolitical reality that forces restrictiveness. The country's financial stability, which Council members mention so often, has ceased to be an internal parameter and has become a derivative of tensions in the Persian Gulf region.

The Monetary Policy Council, by deciding on no changes in July, sent a clear message to investors: we do not plan to ease policy until the uncertainty disappears. This approach is conservative, but in current realities, it is the only one possible. Any premature cut could lead to a sell-off of the zloty, which would consequently cause imported inflation. For the average Pole, this means that the cost of servicing debt will remain at a high level for the coming months.

The impact of the Middle East conflict on Polish finances

The conflict between the USA and Iran, which dominated media headlines in July 2026, has become the main point of reference for decisions made on Świętokrzyska Street in Warsaw. The mechanism of this dispute's impact on Polish wallets is direct and brutal. Instability in the Middle East primarily means the risk of a sharp rise in energy commodity prices, including crude oil.

The Polish Economic Institute (PIE) in its analyses from July 18, 2026, clearly indicates that further MPC decisions are a hostage to the geopolitical situation. If oil prices skyrocket, Poland, as an energy-intensive economy, will feel it immediately. The increase in production costs will translate into consumer goods prices. In such a scenario, an interest rate cut would be a mistake that would fuel inflation.

For the central bank, the key challenge is maintaining currency stability. The zloty, as an emerging market currency, loses value in the face of global unrest. In crisis situations, foreign investors flee toward safe havens, such as the dollar or the Swiss franc. If the MPC were to lower rates at a time when other central banks around the world are keeping them high, the zloty would weaken further. This, in turn, would raise energy import costs.

PIE analysts emphasize that so-called "geopolitical risk" has currently become a more important indicator than GDP readings or labor market data. Borrowers must understand that their financial situation now depends on dispatches flowing from Tehran and Washington. If the tension does not subside, the MPC will have to keep rates at their current level much longer than originally assumed in the forecasts from April 2026.

The zloty under pressure: market reaction to the situation in Iran

The currency market reacted to the July MPC decisions with great nervousness. On the very day the decision was announced, July 8, 2026, the zloty exchange rate was subject to clear volatility. Investors were waiting for clear guidance on the future direction of monetary policy, but received only a "wait and see" signal. The lack of a concrete plan for further cuts was read as an admission of helplessness in the face of external factors.

The key problem is risk pricing. Investors who bought Polish assets in 2025, counting on an improvement in the economic climate, are now withdrawing capital. The weakening of the zloty limits the room for maneuver for the MPC. Every percentage point drop in the currency's value means higher costs for servicing foreign debt and more expensive imports. The Council has found itself caught between the need to support domestic demand and the necessity of defending the purchasing power of money.

Analysts from financial institutions point out that the market has stopped believing in a quick return to a cutting cycle. Forecasts from April 2026, which assumed a gradual easing of policy, have been largely rendered obsolete by the escalation of the conflict in the Middle East. Currently, market valuations suggest that interest rates may remain at an unchanged level until the end of the year, provided the situation in the international arena does not improve significantly.

For the capital market, this is a difficult time. Shares of companies sensitive to credit costs – such as developers or consumer goods firms – are under pressure. Investors do not see prospects for a quick recovery, which forces them to reduce portfolios. The stabilization that the MPC talks about means, in investor language, a lack of impulse for growth. This is a waiting period, in which the fear of the unpredictability of global powers plays the main role.

Forecasts for borrowers: what to expect after 2026?

Borrowers who were still counting on a quick drop in installments at the beginning of the year must revise their expectations. The July 2026 MPC decision is the best proof of this. The reality we are facing in the middle of the year stands in clear contrast to the optimistic forecasts from April. Back then, the uncertainty concerned the pace of cuts; today, it concerns whether the rates will fall at all.

It is worth recalling the date of April 13, 2026, when Direct Money analysts published their forecasts. They assumed a mild rate path that was supposed to relieve household budgets. We now know that these predictions did not stand the test of time. Geopolitics proved to be a variable that completely rearranged the scenario for the Polish economy.

So what awaits us in the coming months? Above all, a period of heightened caution. The Monetary Policy Council will monitor two main indicators: the zloty exchange rate and fuel prices. If the conflict in the Middle East does not die down, the chance for cuts in the fourth quarter of 2026 is negligible. Borrowers must prepare for the fact that their installment amounts will remain at a level similar to the current one.

A negative scenario, i.e., a return to interest rate hikes, cannot be ruled out either. Such a move would be a last resort, but if inflation were to rise sharply due to a commodity shock, the MPC would have no other choice. For those paying off mortgage loans, this means the necessity of having a financial buffer. The period of cheap money, which was promised after the autumn cuts of 2025, has been definitively interrupted.

PIE opinion: why is the MPC holding back on cuts?

The Polish Economic Institute (PIE) acts as a key observer of the Monetary Policy Council's actions. PIE experts consistently emphasize that the "wait and see" strategy does not stem from a lack of willingness to act, but from the necessity of minimizing systemic risk. In PIE's opinion, the MPC correctly assesses that the Polish economy is too small and too open to ignore external shocks.

Why is holding back on cuts so important in the context of PIE's opinion? Firstly, every decision to cut rates sends a signal of monetary policy easing, which immediately weakens the zloty. Under conditions of uncertainty in the Middle East, a weak zloty means higher inflation. PIE experts note that keeping rates at the July 2026 level is an attempt to "anchor" inflation expectations.

Secondly, PIE draws attention to energy price dynamics. Every signal of destabilization in oil-producing regions translates into higher costs for Polish enterprises. If the MPC were to lower rates, it would fuel consumption at a time when the supply of goods might be limited by rising energy prices. This is a straight path to stagflation, i.e., a combination of economic stagnation with rising prices.

Here are the three pillars on which the current MPC strategy is based according to PIE analyses:

1. Protecting the purchasing power of the zloty in the face of capital flight to safe havens.
2. Monitoring energy commodity prices, which react to tensions between Iran and the USA.
3. Avoiding mistakes of the past, where premature easing led to the necessity of sharp hikes in the future.

For borrowers, there is one conclusion: as long as there is chaos in the Middle East, there is no room for relief in credit costs. The Council prefers to be seen as conservative rather than irresponsible. This is a safe haven that protects the banking system, but it is costly for the individual consumer.

Summary of the change cycle: from autumn 2025 to summer 2026

The history of interest rate changes in Poland over the last year is a story of hope that collided with a brutal reality. In the autumn of 2025, the mood was completely different. On November 5, 2025, the Monetary Policy Council decided to cut rates, which was already the second such move that quarter. At that moment, it seemed that we were entering a lasting downward trend that would bring relief to households.

December 2025 brought another cut, but the effect was disappointing. Many banks did not translate the MPC decision into real installment cuts, arguing this with high costs of acquiring capital. Borrowers felt cheated, and the stagnation in banking offers became a fact. Despite this, optimism persisted until the beginning of 2026, when disturbing information began to flow from the Persian Gulf region.

From April 2026, the situation began to change. The market began to price in geopolitical risk, which forced the MPC to change its rhetoric. From the dovish stance that dominated at the end of 2025, the Council shifted into a mode of hawkish vigilance. The July 2026 meeting was a confirmation of this change in course. This is no longer a time for cuts, but for crisis management.

For borrowers who took on liabilities during the time of "cheap money," the current situation is a lesson in humility. The stabilization that the MPC talks about is, in practice, high costs of maintaining debt. The cycle of changes from 2025-2026 shows that monetary policy is not independent of global processes. The Polish economy, being part of the global system, must pay the price for political tensions in places thousands of kilometers away.

What this means for you

Maintaining interest rates at an unchanged level in July 2026 means the continuation of existing financial burdens for borrowers. Loan installments will not budge downward, and in the event of a further weakening of the zloty, they may even rise slightly. Conversely, those with savings in bank deposits benefit, as deposit interest rates will remain relatively high.

The catch, which few speak about aloud, is uncertainty. If the situation in the Middle East gets out of control, the MPC will be forced to raise interest rates to save the zloty exchange rate and curb imported inflation. This means that every borrower should include in their budget plans a scenario in which debt servicing costs rise rather than fall.

For those planning to buy real estate, this is a signal to hold off on decisions. The high cost of credit limits creditworthiness and makes buying an apartment a challenge that requires allocating a much larger portion of income. The real estate market in 2026 slowed down not only because of high rates, but primarily because of the lack of belief in a quick change in this situation.

Questions and answers

Did interest rates rise in July 2026?

No, the Monetary Policy Council decided to keep interest rates at an unchanged level, which is a signal of shifting into defensive mode against geopolitical threats.

What influences MPC decisions in 2026?

The main factor is the escalation of the conflict in the Middle East, which translates into zloty exchange rate volatility, inflationary pressure, and the risk of rising energy commodity prices.

When were interest rates last lowered?

The last significant interest rate cuts took place in the autumn and December of 2025, however, their real impact on borrowers' wallets was limited by the policy of commercial banks.

Are rate hikes possible in the near future?

Although the MPC is keeping rates unchanged, hikes cannot be ruled out in the event of a further deterioration of the geopolitical situation and a sharp rise in imported inflation.

Does PIE forecast a return to cuts in 2026?

The Polish Economic Institute indicates that future MPC decisions are completely dependent on the development of events in the Middle East; as long as tension does not subside, the Council will remain restrained regarding monetary policy easing.

Sources

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