National Bank of Poland preview: Geopolitical tension makes a March cut a close call

The 25bp rate cut we expect this month has clearly been signalled by policymakers – just as the pause we saw in the first months of this year. Headline inflation has been running low in recent months and is widely expected to remain below, or close to, the National Bank of Poland's (NBP’s) 2.5% target (+/- 1 percentage point).

The March NBP staff macroeconomic projection should also point to broad-based and sustainable disinflation in the coming quarters. Core inflation disinflation is not materially at risk following the US strikes on Iran, while higher energy commodity prices – if sustained – pose upside risks to headline CPI. However, this would primarily represent a supply‑side shock, which central banks typically look through.

Additionally, the recently released activity data from the Polish economy provide further justification for monetary easing. Wage growth resumed its downward trend in January after a temporary upswing in the final two months of 2025. This should support a continued slowdown in services inflation, facilitating a further decline in core inflation. Moreover, January data from industry and construction point to some weakening in economic activity in early 2026, reflecting the impact of severe weather conditions but also calling for full year growth below 4% year over year.

The new variable which needs to be considered by the Monetary Policy Council is the US-Israeli strikes on Iran, the upward impact of energy commodities on inflation and downside on GDP and especially investments.

We estimate that a persistent 10% upswing in crude oil may boost CPI inflation by 0.2-0.5 percentage points. The negative impact on GDP is probably of lower magnitude (0.2-0.3pp), but we also need to factor in the long-term effect of geopolitical uncertainty affecting business confidence and undermining private business's propensity to invest.

If current spot prices of Brent were sustained, it would add up to 1pp to inflation. So, the magnitude of the oil shock poses a significant upside risk to headline CPI, but at the same time, the shock may be temporary in nature and possibly unwind in a few weeks.

The strike on Iran is clearly a supply shock which central banks usually look through. It differs from the Covid/Russia war shocks as these were a combination of supply and demand shocks and caused a more significant rise in prices and de-anchored inflation expectations.

Also, the strike on Iran may dampen economic activity and weigh on business sentiment, with possible adverse effects on investment activity.

At the current juncture, the shock seems to be more persistent risk for private investments than for inflation.

We therefore maintain our baseline assumption of a March cut, but the probability of easing has declined. We expect a 25bp cut to be accompanied by a hawkish statement on Wednesday. Moreover, NBP Governor Glapiński is likely to present a more cautious policy outlook at Thursday’s press conference, even if the new macroeconomic projection clearly points to a lower-than-expected inflation path.

Until the situation in Iran becomes clearer, it is difficult to assess the likelihood and timing of any additional rate cuts. However, the NBP’s terminal rate may well end up higher than the 3.25% assumed so far.