Poland’s inflation rate stood at 2.2% in January, meeting the central bank’s target and signaling potential interest rate cuts.
Inflation Meets Central Bank Target
According to data from the Central Statistical Office, annual inflation in January was 2.2%, while analysts expected 1.9%. Despite this difference, the result means maintaining price dynamics within the NBP’s inflation target of 2.5% with a permissible deviation of 1 percentage point. An equally favorable level was last recorded in March 2024, nearly two years earlier.
The stabilization of inflation indicates a return to more predictable conditions after a period of rapid price increases caused by the pandemic, money emission, and cost shocks related to the war in Ukraine and global commodity price increases.
Impact on Workers’ Real Wages
Falling price dynamics directly affect workers’ situations. Inflation causes a delayed decrease in the real value of wages – salaries are raised only after a period of price increases, meaning that for many months workers bear higher living costs without adequate compensation.
With inflation at 2.2%, the real loss of money’s value is much smaller than in 2021-2023 when prices rose by several percent annually. This means that wage growth, even moderate, translates into an actual improvement in the financial situation of households.
Benefits for Retirees
Stabilizing inflation is particularly beneficial for retirees. Benefit indexation occurs once a year, meaning seniors feel the effects of rising prices for months without immediate compensation.
In 2025, the indexation of pensions and benefits was 5.3%, compared to 5.5% the previous year. Meanwhile, inflation during this period was significantly lower, meaning the real value of benefits decreased by only 2.2% over the year. This is a significantly better result than during high inflation when the real purchasing power of pensions fell much faster.
Interest Rate Cut Expectations
Falling inflation increases the likelihood of interest rate cuts by the Monetary Policy Council. Currently, the main reference rate is 4%, and the market expects it to be lowered in the coming months.
Optimistic forecasts suggest rates could even fall to 3.25% this year, while NBP President Adam Glapiński indicated a level around 3.5%.
Effects on Business Investment
Lower interest rates also reduce the interest rates on investment loans, increasing companies’ willingness to undertake new projects. Inflation is crucial for business investment. High price dynamics increase the risk of project cost overruns and can lead to delays or abandonment.
For example, the Olefin III project implemented by Orlen. Initially in 2018, the investment cost was estimated at 8.3 billion zloty, but in June 2021 it rose to 13.5 billion zloty, and two years later reached 25 billion zloty. The main reasons were rising material prices, worker shortages, and the effects of the war in Ukraine.
Government Debt Costs Decline
Falling inflation also means lower costs for servicing public debt. In November 2025, debt servicing costs amounted to 68.2 billion zloty, which was 8.8% of budget expenditures and as much as 13% of state revenues.
A 0.5 percentage point reduction in interest rates could bring budget savings of about 2.4 billion zloty in the first year. Additionally, the yield on Polish 10-year bonds fell below 5% for the first time since January 2024, meaning lower debt financing costs.
Economic Growth Prospects
Inflation directly affects economic growth through consumption and investment. High inflation limits the real purchasing power of households, reducing demand for goods and services.
Price stabilization promotes consumption growth as real incomes rise faster. At the same time, companies are more willing to invest when costs are predictable and credit is cheaper. History shows that periods of low inflation can foster economic growth. In 2014-2016, despite deflation, Poland’s unemployment rate fell from 14% to 8.2%, and domestic and foreign investments contributed to wage growth and consumption increases.
