Poland cuts interest rates under Tusk as inflation slows

Central bank’s move marks first rate cut since Donald Tusk’s return to power.

The financial district in Warsaw, Poland, on May 7, 2025. Photo by Damian Lemanski/Bloomberg

By Sarah Oktaviany and Hayu Andini

Poland cuts interest rates for the first time since Prime Minister Donald Tusk returned to power, signaling a shift in monetary policy as inflation eases and political pressure intensifies ahead of the country’s upcoming presidential election. On Wednesday, the National Bank of Poland (NBP) reduced its benchmark interest rate by 50 basis points, bringing it down to 5.25 percent. This marks the first rate cut since October 2023 and aligns Poland’s central bank with broader European trends of easing borrowing costs.

Inflation slowdown prompts central bank action

The central bank’s decision to lower interest rates came in response to a noticeable decline in Poland’s inflation rate. Consumer price inflation dropped to 4.2 percent in April, down from 4.9 percent in March. While still above the bank’s medium-term target of 2.5 percent, the downward trend provided the monetary policy council with justification to act.

NBP governor Adam Glapiński had already hinted at a possible rate reduction in late April, noting that persistent disinflationary pressures were creating the space needed for a cut. Under the bank’s current inflation targeting framework, fluctuations of up to one percentage point above or below the 2.5 percent benchmark are considered acceptable.

Political pressure mounts on central bank

Prime Minister Donald Tusk has been increasingly vocal about the need for lower interest rates. Just days before the rate cut, Tusk stated it was “high time” the NBP moved to ease monetary policy, emphasizing the burden high rates were placing on Polish households and businesses.

After the bank’s announcement, Tusk posted on X (formerly Twitter), saying: “Interest rates have finally been lowered. Better late than never.” His remarks reflect a broader political narrative aimed at linking economic relief to his government’s leadership, especially as Poland’s presidential election looms on May 18.

Tusk’s government has had a contentious relationship with the NBP since returning to power in December 2023. Even before securing the premiership, he accused Glapiński—who has ties to the previous Law and Justice (PiS) administration—of politicizing monetary policy and mismanaging inflation during his tenure. Tusk’s attempts to have Glapiński appear before a state tribunal failed, but the political pressure has not abated.

Regional monetary shifts and comparisons

Poland’s rate cut follows a broader trend among European central banks easing policy in response to falling inflation. The European Central Bank (ECB) began cutting its key rates in June 2024, marking a pivotal moment for monetary policy in the eurozone. On the same day as the Polish announcement, the Czech National Bank also moved to reduce its main interest rate by 25 basis points to 3.5 percent.

These moves reflect a continental shift away from the tight monetary policies that defined the previous two years of fighting inflation. Economists argue that central banks that maintain restrictive policies for too long could risk economic stagnation or undermine financial credibility.

Central bank strategy and economic outlook

Analysts suggest that the Polish rate cut may be only the beginning of a more dovish monetary cycle. Piotr Arak, chief economist at VeloBank in Warsaw, said, “Keeping interest rates elevated for too long could risk harming the economy and the reputation of the central bank.” Arak welcomed the cut as a timely intervention, especially given the slowing pace of wage growth and the softening data emerging from Poland’s industrial and retail sectors.

Rafał Benecki, chief economist at ING Poland, also noted a strategic pivot by Glapiński, who in 2023 had maintained a more hawkish tone. According to Benecki, the governor’s recent change in messaging could reflect a desire to avoid being outvoted by the increasingly dovish monetary policy council. Benecki forecasts that the NBP could reduce the benchmark interest rate to as low as 3.75 percent by the end of 2026, provided current trends continue.

“Lower current and expected inflation, along with weaker economic indicators, create significant room for adjusting the restrictiveness of monetary policy in the coming quarters,” Benecki said.

Political implications and institutional tensions

The intersection of monetary policy and politics remains a fraught space in Poland. Glapiński’s reappointment in 2022 by the former PiS-led government was seen by many as an effort to entrench control over the central bank. His personal friendship with PiS leader Jarosław Kaczyński has drawn scrutiny from pro-EU lawmakers, including Tusk, who aim to restore institutional independence and rebuild trust in financial governance.

Although Glapiński’s term runs until 2028, recent developments suggest that his position could come under renewed challenge if tensions between the central bank and government continue. Tusk’s failed attempt to bring Glapiński before a state tribunal has not diminished his administration’s intent to reform financial oversight mechanisms.

Broader economic context and next steps

Poland’s economy is currently navigating a delicate recovery. While inflation has moderated, GDP growth remains uneven, and consumer confidence has yet to fully rebound. The rate cut could offer some relief to borrowers and businesses, but economists caution that further stimulus may be needed if global conditions deteriorate.

With the presidential election just around the corner, economic issues are dominating the political debate. Tusk’s coalition is positioning the rate cut as part of a broader strategy to revive economic momentum, increase public spending, and ease household financial pressures.

The NBP’s next monetary policy decision will be closely watched, especially for signs that additional rate cuts are imminent. Market expectations suggest that further easing could arrive in the second half of 2025, particularly if inflation continues its downward trajectory.

For now, the decision to cut rates is being viewed as a victory for Tusk’s administration—and a potential turning point in the long-running battle over Poland’s economic direction.