NBP Seen Ending Easing Cycle as Rates Set to Hold Steady, BBH Says

Analysts at Brown Brothers Harriman (BBH) have signaled that the National Bank of Poland (NBP) is likely to conclude its current easing cycle soon, with interest rates expected to remain on hold for the foreseeable future. The assessment comes amid persistent inflationary pressures and a cautious economic outlook in Central Europe.

What BBH’s Analysis Reveals

According to BBH’s latest note, the NBP’s monetary policy council has limited room for further rate cuts after delivering several reductions over the past year. The analysts point to core inflation, which remains above the bank’s target range, and a tight labor market as key factors that will keep policymakers from easing further. The Polish zloty has also remained relatively stable, reducing the urgency for additional monetary stimulus.

The NBP’s benchmark interest rate currently stands at 5.50%, following a series of 25-basis-point cuts in 2025. BBH expects the rate to stay unchanged through at least the end of 2026, barring a sharp economic downturn or a significant drop in inflation.

Context and Implications for Poland’s Economy

Poland’s economy has shown resilience, with GDP growth moderating but remaining positive. However, the inflation outlook remains uncertain. Headline inflation has eased from double-digit highs but is still hovering around 4-5%, above the NBP’s 2.5% target midpoint. Food and energy prices, while volatile, have not fallen enough to give the central bank confidence to cut further.

BBH’s view aligns with a broader consensus among market participants that the NBP will adopt a wait-and-see approach. The European Central Bank’s own cautious stance also influences the region’s monetary policy trajectory. For Polish borrowers, the end of the easing cycle means mortgage and loan rates are unlikely to fall further in the near term, potentially cooling housing demand.

Market Reaction and Currency Outlook

The Polish zloty has traded in a narrow range against the euro in recent weeks, reflecting the market’s expectation of stable rates. BBH suggests that if the NBP signals a definitive end to cuts, the zloty could strengthen modestly as foreign investors seek higher yields. Conversely, any surprise easing would likely pressure the currency.

Conclusion

The NBP appears poised to keep interest rates unchanged for an extended period, marking the end of its current easing cycle. BBH’s analysis underscores the central bank’s focus on controlling inflation while supporting economic stability. For investors and businesses operating in Poland, the message is clear: monetary policy is shifting to a holding pattern, and further rate movements will depend on how inflation and growth evolve in the coming quarters.

FAQs

Q1: Why is the NBP expected to stop cutting rates?
The NBP is likely to pause its easing cycle because core inflation remains above target, the labor market is tight, and the economy has shown resilience. BBH analysts believe there is limited room for further cuts without risking a resurgence in inflation.

Q2: What does this mean for Polish borrowers?
With rates expected to stay on hold, mortgage and loan rates are unlikely to decrease further in the near term. Borrowers should plan for stable borrowing costs rather than expecting additional relief from central bank policy.

Q3: How might this affect the Polish zloty?
A definitive end to the easing cycle could support the zloty, as foreign investors may be attracted to higher yields. However, any unexpected dovish signal from the NBP could weaken the currency. The zloty is expected to remain range-bound against the euro for now.