The National Bank of Poland is expected to keep interest rates unchanged at its July 7-8 meeting, but the next move will likely be a cut as inflation has returned to target, according to economists at ING Bank. The Monetary Policy Council (RPP) has already lowered rates seven times since early 2025, bringing the reference rate to 3.75 percent, the lowest level in over four years.
After six cuts in 2025 (from 5.75% to 4.25%) and one more in March 2026, the RPP has paused amid geopolitical tensions linked to the Middle East conflict. However, June inflation data released by the Central Statistical Office (GUS) surprised on the downside, easing pressure on the council. Consumer price inflation fell to 2.5 percent year-on-year from 3.1 percent in May, hitting the NBP’s target exactly.
“This means there is no need for rate hikes, and the fuel price shock did not generate a clear inflationary impulse,” ING economists wrote in a commentary published on Tuesday.
Inflation falls to target, easing pressure on RPP
June saw a sharp 7.4 percent month-on-month decline in fuel prices, driven by a drop in crude oil from over $100 a barrel to just above $70. This allowed retail fuel prices to fall despite the reintroduction of higher excise duties earlier this year. Food and non-alcoholic beverage prices fell 0.7 percent month-on-month, while energy prices slipped 0.4 percent. Compared to a year ago, food prices are now lower.
“The June inflation estimate puts the Monetary Policy Council in a comfortable situation. Inflation is at the target, and the oil market shock generated only a limited impulse, largely confined to fuel prices,” the analysts said.
Oil price slump and disinflationary trends give room for cuts
ING notes that just three weeks ago, forward rate agreements (FRA) priced in at least three rate hikes of 25 basis points each. That expectation has now evaporated. “We expect speculation to begin that in the second half of 2026, NBP rates could be cut,” the report states. The bank believes the current pause was triggered by the geopolitical shock, but the underlying disinflationary and even deflationary trends (food) provide scope for renewed easing.
“From today’s perspective, the Middle East war interrupted the adjustment cycle in monetary policy, but the NBP could return to it if medium-term inflation prospects develop favorably,” ING added.
Outlook depends on July inflation projection and geopolitical risks
The key factor for the RPP will be the new inflation projection due to be released alongside the July decision. The central bank’s own forecast will help assess whether the current disinflation is sustainable. Economists point out that underlying price pressures remain subdued, and the labor market is cooling, which should support a continued downward trend. However, any renewed spike in oil prices or escalation of the Middle East conflict could still derail the path.
“The July projection should allow the Council to better evaluate current trends and the potential room for monetary policy easing,” ING concluded.
Źródło: WNP.PL, Fot. Andreia Veiga / Shutterstock
