Poland’s central bank keeps interest rates steady amid economic uncertainties

Investing.com -- The Central Bank of Poland, Narodowy Bank Polski (NBP), has announced that it will maintain its current interest rates, following a decision-making meeting held by the Monetary Policy Council on 11-12 March 2025. The NBP interest rates remain as follows: the reference rate at 5.75%, lombard rate at 6.25%, deposit rate at 5.25%, rediscount rate at 5.80%, and discount rate on bills of exchange at 5.85%.

In the fourth quarter of 2024, the annual GDP growth in the euro area saw an acceleration, while Germany experienced a slight dip. In the United States, the annual economic activity growth in the same period was near its longer-term average. Inflation in major advanced economies was slightly above the central banks’ inflation targets, primarily due to increased core inflation, including services price growth.

In Poland, GDP growth accelerated to 3.2% year-over-year in the fourth quarter of 2024, up from 2.7% in the third quarter, according to preliminary estimates from Statistics Poland. Domestic demand, including private consumption, also rose to 4.8% year-over-year. In January 2025, annual growth rates of retail sales and construction and assembly production increased significantly, while industrial output growth was negative.

The labor market in Poland continues to show low unemployment and a high number of working persons, despite a slight decrease in employment in the enterprise sector in January 2025 compared to the previous year. Wage growth remains high.

Annual CPI inflation in Poland rose to 5.3% in January 2025, significantly above the NBP target, primarily due to increases in administered energy prices, including partial unfreezing of energy carriers prices from July 2024 and an increase in natural gas distribution tariffs from January 2025. Core inflation was also elevated, mainly due to rapidly rising services prices amid high wage growth.

The Council reviewed the results of the March projection of inflation and GDP based on the NECMOD model. The projection, prepared under the assumption of unchanged NBP interest rates, predicts a 50-percent probability that the annual price growth will range between 4.1 – 5.7% in 2025, 2.0 – 4.8% in 2026, and 1.1 – 3.9% in 2027. The annual GDP growth is projected to be between 2.9 – 4.6% in 2025, 1.9 – 4.0% in 2026, and 1.1 – 3.5% in 2027.

The Council anticipates that inflation this year will be significantly above the NBP inflation target, driven by the effects of the already introduced increases in energy prices, rises in excise duties and administered services prices, as well as the further unfreezing of energy prices in the second half of 2025.

In the medium term, under the current NBP interest rates level and amid the expected gradual decline in wage growth, inflation is expected to return to the NBP target. The impact of elevated inflation on inflation expectations and wage pressure, especially amid rising demand and low unemployment, remains uncertain.

The Council concluded that the current level of NBP interest rates is conducive to meeting the NBP inflation target in the medium term. Future decisions will depend on incoming information regarding prospects for inflation and economic activity. The NBP has committed to taking all necessary actions to ensure macroeconomic and financial stability, including bringing inflation down sustainably to the NBP inflation target in the medium term. The NBP may also intervene in the foreign exchange market.

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