Central Bank Holds Steady at 5.75% to Balance Economic Stability

Poland’s central bank, the National Bank of Poland (NBP), decided to keep its benchmark interest rate at 5.75% during its January meeting. This marks the fourth consecutive month without changes, reflecting the bank’s cautious approach to managing persistent inflation and economic uncertainties.

NBP President Adam Glapiński reiterated the bank’s commitment to avoiding rate cuts until late 2025. He cited several concerns, including a potential resurgence in inflation, a strong US dollar driven by the Federal Reserve’s hawkish policies, and the looming expiration of energy price caps in 2025, which could exert upward pressure on costs.

Inflation Trends Highlight Mixed Sectoral Impacts

Poland’s inflation rate remained at 4.7% in December 2024, mirroring November’s figures but slightly below initial forecasts of 4.8%. The latest data from the Central Statistical Office of Poland (GUS) revealed varied sectoral impacts.

Utilities and housing costs experienced an uptick, climbing to 10.1% in December from 9.9% in November. Health expenses also rose to 5.5% from 5.3%. On the other hand, transport costs decreased at a slower pace, dropping by -3.3% compared to November’s -4.1%. Recreation prices eased to 5.5% from 6.1%, while food and non-alcoholic beverage costs remained stable at 4.8%.

The inflation figures underscore the challenges of managing cost-of-living pressures while maintaining economic growth.

Economic Growth Projections Signal Optimism

Poland’s economy is expected to expand in the coming years, with GDP growth projected to reach 3.6% in 2025, up from 3% in 2024. The European Commission anticipates continued momentum in 2026, with growth stabilizing at 3.1%.

Key drivers include private consumption, EU-funded public investment, and rebuilding efforts following the September 2024 floods. Export recovery, bolstered by improved global economic conditions, is expected to narrow trade deficits.

Inflation, however, is forecast to rise to an average of 4.7% in 2025, up from 2024’s 3.8%, before easing to 3% in 2026. Unemployment is projected to remain low, averaging 2.8% in 2025 and 2.7% in 2026, a slight improvement from 2024’s 2.9%.

Balancing Risks and Opportunities

The NBP’s decision highlights its focus on maintaining stability amid global and domestic challenges. With steady growth projections and low unemployment, Poland aims to navigate inflationary pressures while fostering economic resilience in the years ahead.