Poland’s Monetary Policy Council, the rate-setting body of the National Bank of Poland (NBP), reduced the central bank’s reference interest rate by 25bp to 3.75% at its March 4 meeting.

The NBP decided on the reduction despite “the outlook for global activity and inflation [being] subject to uncertainty, related, in particular, to the geopolitical situation,” it said, referring to US-Israeli strikes on Iran that threaten a rise in inflation due to the blockade of the Strait of Hormuz, a key oil and gas shipping route.

The war has already seen oil prices spike to over $80 per barrel. 

The decision to cut rates ends a short two-month pause in monetary easing following five consecutive 25-bp cuts between July and December. 

Over the course of 2025 overall, rates were reduced six times by a cumulative 175 basis points as inflation eased towards the NBP’s target range of 1.5% – 3.5%.

Poland’s inflation rate slowed to 2.2% year-on-year (y/y) in January, from 2.4% y/y the preceding month, according to the most recent data published by the statistical office GUS in January.

Apparently unfazed by the war in Iran, the NBP said that “taking into account inflation developments and its outlook for the subsequent quarters … it became justified to adjust the level of the NBP interest rates.” 

“At the same time, annual wage growth in the enterprise sector in January 2026 was markedly lower than in the previous month,” the NBP also said, pointing to another important disinflation factor in the Polish economy.

Policymakers again said that future monetary policy decisions will depend on incoming information on inflation and economic activity - but added a line reflecting the potential impact of the war on Iran.

“Fiscal policy, expected recovery of demand in the economy, further developments in wage growth as well as macroeconomic situation abroad – including changes in global commodity prices and inflation, amid geopolitical tensions – remain risk factors for inflation outlook,” the NBP said.

The NBP also presented its latest inflation and GDP growth outlook.

The new outlook assumes that annual inflation rate will fall to 1.6% and 2.9% in 2026, compared with a forecast range of 1.9% to 4% in the November 2025 projection. For 2027, inflation is expected to fall within a 1.1% to 3.7% range, again slightly narrower than the earlier 1.1% to 4.1% forecast, while the 2028 projection places inflation between 0.9% and 4.0%.

Annual GDP growth is projected with a 50% probability to reach between 3.1% and 4.7% in 2026, compared with a 2.7% to 4.6% range in the November 2025 forecast. For 2027, economic growth is expected to fall within a 2.0% to 3.8% range, up from the previous projection of 1.5% to 3.7%. The 2028 outlook places GDP growth between 1.8% and 4.1%.

The NBP might have noted developments in Iran, but it was domestic factors - including the lower inflation outlook in the new projection - that proved decisive, analysts say. The decision to cut rates was also supported by the strengthening of the zloty observed ahead of the announcement.

“Still, the war in Iran— especially the scale and persistence of any disruption to the production and transport of energy commodities — as well as movements in the foreign-exchange market will be key for the council’s next steps,” PKO BP said in a note.

“Under the baseline scenario, interest rates are expected to fall quickly to 3.5%, possibly as early as April … Prolonged geopolitical uncertainty could, however, delay further easing and may even lead to an earlier end to the monetary policy adjustment cycle,” PKO BP also said.