National Bank of Poland cuts reference rate by 50bp to 5.25% in first cut since 2023

The National Bank of Poland (NBP) cut its reference rate by 50 basis points to 5.25% on 7 May 2025, its first reduction in borrowing costs since October 2023. The decision by the bank's Monetary Policy Council (MPC) lowered the benchmark from 5.75%, the level at which it had been held since the last cut in October 2023.

“Taking into account incoming information, including lower current and forecast inflation, decreasing wage growth and weaker data on economic activity, in the council’s assessment, the adjustment of the level of the NBP interest rates became justified,” the MPC said in a statement following its rate-setting meeting.

EASING RESUMES AS INFLATION SLOWS

A flash estimate from Statistics Poland (GUS) showed consumer price inflation slowing to 4.2% year on year in April 2025, from 4.9% in March. The NBP's inflation target is 2.5%, with a permitted deviation of plus or minus one percentage point, meaning inflation remained above the upper end of the tolerance band at the time of the decision.

The central bank attributed the April slowdown to the fading impact of a high base effect from the previous year's sharp rise in food prices, driven in part by the reinstatement of the standard VAT rate on food in April 2024. It also pointed to lower fuel prices, reflecting falling global oil prices and a weaker US dollar.

Wage growth has also eased. Average monthly salaries in the corporate sector rose by 7.7% year on year in March 2025, the fourth consecutive month of annual wage growth below 10% and well below the rise of nearly 16% recorded in July 2022.

The MPC's post-meeting statement did not include explicit forward guidance on the path of interest rates, with future decisions to depend on incoming data.