Inflation in Poland escaped the central bank’s target of 2.5% during the COVID-19 pandemic despite monetary policy objectives from 2002 to maintain this level.

After the key interest rate was slashed 0.1% in 2020 to support the economy through the lockdown-induced slowdown, in the second quarter of 2021 (CPI) jumped to over 4%, eventually prompting the central bank to push interest rates up to 2.25% in early February of 2022. By then, the inflation rate was 8.4%.

When Russia launched a full-scale invasion against Ukraine on February 24, 2022, the CPI skyrocketed, primarily as a result of high food and energy prices.

Inflation peaked at 18.4% by February 2023, yet NBP’s subsequent raises to the interest rates stopped in September 2022, with the key interest rate at 6.75%.

After the February peak, the inflation rate dropped significantly, reaching 10.8% in July, and the NBP claims that the CPI will reach the target of 2.5% in the second half of 2023 or during 2024. The Governor of Poland’s Central Bank, Adam Glapiński, continuously defends the bank’s decisions not to increase interest rates further stating “We view the current level (of rates) as appropriate.”

A former Polish opposition MP, economist Ryszard Petru, told Harbingers’ Magazine that NBP’s decision should be analysed through a political lens.

He said: “If the NBP begins to cut interest rates in September, in a situation where inflation is almost four times above the target, and the current level of rates brings it to the target only in 2025, it will be evidence of the NBP’s full political usurpation and working for the electoral result of the Law and Justice (PiS) [ruling] party, at the expense of the Poles’ wallets.”

On August 8, the President of Poland Andrzej Duda announced that the highly contested general election will take place on October 15.