Poland’s Central Bank Holds Rates Steady, Citing Geopolitical Uncertainty

Warsaw, Poland — The National Bank of Poland (NBP) kept its benchmark interest rate unchanged at 5.75% during its March 2025 meeting, extending a pause that began in October 2023. The decision, widely expected by economists, was driven by persistent inflation pressures and heightened geopolitical risks, particularly related to the ongoing conflict in Ukraine and trade policy uncertainty.

Rate Decision and Rationale

The Monetary Policy Council (MPC) voted to maintain the reference rate at 5.75%, the lombard rate at 6.25%, and the deposit rate at 5.25%. In its official statement, the MPC noted that while headline inflation has eased from its 2023 peak, core inflation remains elevated, and the outlook is clouded by external factors. “Geopolitical tensions and their impact on energy prices and supply chains continue to pose significant upside risks to inflation,” the statement read. The Council emphasized that a data-dependent approach remains appropriate, with no clear timeline for rate cuts.

Geopolitical Factors at Play

Poland’s proximity to the war in Ukraine makes its economy particularly sensitive to security developments. The NBP’s decision reflects concerns that further escalation could disrupt trade routes, increase defense spending, and push energy costs higher. Additionally, global trade policy shifts, including potential tariffs under the new U.S. administration, add another layer of uncertainty for Polish exporters. These factors have kept the MPC cautious, despite domestic demand showing signs of moderation.

Impact on Borrowers and the Zloty

For Polish households and businesses, the unchanged rate means mortgage payments and corporate borrowing costs remain at elevated levels. The average variable-rate mortgage in Poland is tied to the WIBOR benchmark, which has stayed above 5.8% since late 2023. On the currency front, the zloty has remained relatively stable against the euro, trading around 4.30 PLN/EUR. Analysts at ING Bank Śląski said the rate hold reinforces the zloty’s carry trade appeal, but geopolitical shocks could trigger sudden depreciation. “The NBP’s cautious stance provides some support for the currency, but external risks dominate the outlook,” they wrote in a note.

Conclusion

The NBP’s decision to hold rates underscores the delicate balancing act facing central banks in Central Europe: managing persistent inflation while navigating an unpredictable geopolitical landscape. For Poland, the path to rate cuts depends on a sustained decline in core inflation and a de-escalation of regional tensions. Until then, the MPC is likely to remain on hold, prioritizing stability over stimulus.

FAQs

Q1: Why did Poland’s central bank keep interest rates unchanged?
The Monetary Policy Council cited persistent core inflation and significant geopolitical risks, particularly the war in Ukraine and global trade uncertainty, as reasons to maintain the current rate of 5.75%.

Q2: How does the rate decision affect Polish mortgage holders?
Mortgage rates remain elevated, as variable-rate loans are tied to the WIBOR benchmark, which stays above 5.8%. Borrowers will not see immediate relief, and the NBP has not signaled when cuts might begin.

Q3: What is the outlook for the Polish zloty?
The zloty has been stable near 4.30 per euro, supported by the carry trade. However, any escalation in geopolitical tensions could trigger volatility and depreciation. The NBP’s cautious stance offers some buffer but does not eliminate external risks.