Poland Doubts Rate Cut Amid Iran Conflict

The Monetary Policy Council's decision marks the first central bank rate decision since the US and Israel started bombing Iran five days ago, upending investment sentiment for emerging-market assets. Six out of 34 economists surveyed by Bloomberg News changed their forecast, now predicting the benchmark rate will remain unchanged at 4%, despite Governor Adam Glapinski's previous indication of a March easing.

mBank SA economists, led by Marcin Mazurek, state there will be no interest rate cut. Societe General SA economist Juan Orts believes Polish inflation will remain "virtually unchanged" by the Iran conflict in a baseline scenario, but a worst-case scenario projects a 1.3 percentage point increase in this year's inflation peak.

Orts still expects a 25 basis point cut but anticipates a more cautious tone from the NBP. Poland has set natural gas tariffs for the first half of 2026, delaying immediate household impact, and the government pressures state oil company Orlen SA to curb fuel price increases.

The Iran war has weakened the zloty by 1.7% against the euro, dropped Warsaw's WIG20 index by 4.5%, and increased yields on benchmark government bonds. Derivatives used to bet on Polish interest rates jumped 16 basis points since the Iran war started, signaling trader skepticism toward easing.

This contrasts sharply with a week ago when Glapinski projected inflation near target through 2027, following January's 2.2% inflation. Piotr Matys, a currency strategist at InTouch Capital Markets Ltd., stated a quarter-point cut was "essentially a done deal" before the war, but now it is too risky due to higher oil and gas prices and a weaker zloty.