Price stability and the inflation target

National Bank of Poland President Adam Glapiński stated that the central bank's primary statutory and constitutional task remains the maintenance of price stability. Following several months of low inflation, domestic price growth is expected to rise above the official target of 2.5%, which carries a permitted deviation range of 1 percentage point. Glapiński explained that the central bank possesses no direct leverage over global energy prices, but it holds an obligation to prevent price pressures from becoming permanent. Although he indicated that projected price growth is not expected to reach extreme levels, staying above target requires decisive central bank intervention. The Monetary Policy Council will analyze the specific drivers of inflation alongside the broader impact of energy costs on economic activity.

Energy shocks and external pressures

Glapiński identified international supply disruptions as the main catalyst behind the renewed price pressures facing European economies. He pointed specifically to ongoing events in the Strait of Hormuz as an example of supply shocks that transmit across multiple economic sectors. Increases in the costs of commodities, petrol, and natural gas create a contagion effect that reaches beyond energy markets into consumer goods and services. Glapiński observed that foreign central banks, including the European Central Bank and the US Federal Reserve, have already responded to these global developments by tightening monetary policy. Poland remains exposed to these worldwide market movements as energy prices climb.

“The European Central Bank and the American central bank are raising rates, they have already raised rates, and this is spreading. The whole economy is infected with inflation. We are not isolated from this. There is an increase in energy commodity prices on global markets and sooner or later it spreads to the entire economy.”

Reversal of rate cut expectations

The shift in the global energy environment has altered previous expectations for monetary easing in Poland. Glapiński noted that his earlier personal expectation regarding potential rate reductions by late 2026 has been completely discarded. That view, which he had expressed publicly following the Monetary Policy Council meeting in July, gave way to what he termed a winter, hawkish environment. At a subsequent press conference in September, Glapiński had indicated that interest rates might remain stable under high energy prices until mid-2027. Recent market movements have shifted toward monetary tightening, with investors recently pricing an increase in the reference rate of 1.25 percentage points to 5%.

“We assumed that interest rate cuts would be possible even by the end of this year. I personally assumed so. I expressed this publicly in July, in my own name, privately, not on behalf of the Council. Of course, that has completely dissipated. There is a winter, hawkish mood.”

Public debt and economic growth trade-offs

The Monetary Policy Council faces a complex trade-off between curbing inflation and preserving economic activity. Glapiński acknowledged that raising interest rates dampens economic growth and adds pressure to the state budget. Poland currently manages a large budget deficit alongside rapidly growing public debt, both of which increase the overall cost of debt servicing when rates rise. The central bank head emphasized that while elevated interest rates do not assist government borrowing costs, the central bank's principal legal obligation is to keep inflation under control. Final policy decisions will remain in the hands of the Monetary Policy Council as it weighs these economic factors.