Glapiński on inflation, economy and EU ecological inventions. "Cash will always work"

At its July meeting, the Monetary Policy Council, contrary to the expectations of the vast majority of economists, lowered interest rates by 25 basis points. Apart from economic issues, NBP President Adam Glapiński sharply commented on the EU's climate policy. "Such climate luxuries can be afforded at a certain level of development, when people have their basic needs met," he noted.

Pursuant to the decision of the Monetary Policy Council published on 2 July 2025, the interest rates of the National Bank of Poland will be as follows:

• reference rate 5.00% per annum;
• Lombard rate 5.50% per annum;
• deposit rate 4.50% per annum;
• bills of exchange rediscount rate of 5.05% per annum;
• bill discount rate 5.10% per annum.

- Although most economists are betting on leaving rates at an unchanged level, market valuations are however leaning towards their a 25 basis point reduction – this is what they wrote before the Council's decision was announced PKO BP economists. As it turned out, the cut was made despite the consensus analysts' forecasts clearly indicated that this would not happen. was stated by 3 of the 29 economists surveyed.

On the previous one At the Monetary Policy Council meeting, a decision was made to maintain interest rates at unchanged levels . In May, the Council decided to a strong 50-basis-point cut after a 17-month break in cost reduction credit.

- The decreasing inflation from quarter to quarter is proof that the NBP's policy was right. The decrease in inflation means that monetary policy prevented inflation from becoming permanent and spreading - said NBP President Adam Glapiński at the beginning of the conference.

"Inflation is falling from quarter to quarter. According to the projection, from July inflation will be in line with the NBP inflation target level . We have managed to push it back to the level we had a year ago. Moreover, wage dynamics in the corporate sector have slowed down again and further forecasts indicate a further slowdown in wage dynamics. In view of the above, after a long decision, the Council considered it necessary to carefully adjust interest rates to the falling inflation," noted Glapiński.

The projection shows that in the medium term inflation will be in line with the NBP inflation target of 2.5% with a permissible deviation of one percentage point - noted the NBP President.

President Glapiński also expressed concern about the persistent and very high fiscal deficit.

Fiscal policy is very loose. According to EC forecasts, the deficit will amount to 6.4% and will be one of the highest in Europe. The EC forecast assumes that the fiscal deficit will also remain very high next year and we will not be dealing with fiscal tightening. Everything indicates that in 2026 the public debt will exceed 60% of GDP for the first time in history. The rapid growth of debt is worrying, as it poses a threat to macroeconomic stability, including inflation - indicated the president of the central bank.

Unemployment is exceptionally low. At the same time, employment in the corporate sector has been decreasing for several months. In May, wage dynamics slowed to 8.4% and are no longer double-digit after a clear acceleration in April. A slowdown in wage growth is expected - indicated Adam Glapiński.

The next decisions of the Council will depend on the inflow of information. This is not the beginning of a cycle of interest rate cuts - we are not announcing anything like that . We do not have a set path for interest rates. Our commitment is to bring inflation down to the target - emphasized President Glapiński.

- We did not provide any indication that rates would not be changed in July. We reacted to new data. Here, the substantive situation was rather obvious - this is how the NBP president commented on the discrepancy between the July decision and the expectations of most analysts.

In the opinion of the head of the central bank, the government's fiscal policy is "very loose, the loosest in Europe next to Romania", so it remains a strong pro-inflationary factor.

"Let me remind you that last year the public finance sector deficit increased to 6.6% of GDP. At the same time - according to the European Commission's forecasts - this year the deficit will amount to 6.4% of GDP and will again be almost the highest in the European Union. These are the highest indicators in our history. The Commission's forecast signals that, taking into account the current legal status, there will be no fiscal tightening - limiting the deficit and expenditure - next year as well, and the structural deficit will remain high," he emphasized.

The President of the National Bank of Poland indicated that although the draft budget will be published in September, the government has not announced any actions to reduce the deficit so far.

"Everything indicates that in 2026, public debt will exceed the EU threshold of 60 percent of GDP for the first time in history," Glapiński said. He added that the very rapid growth of debt is worrying because it creates a risk of macroeconomic instability, including long-term price stability.

The NBP President noted that the economic situation remains good. "After GDP growth of 3.2 percent in Q1, the dynamics of activity probably accelerated slightly in Q2," he noted.

He also said that the data for April and May indicate a favorable situation in retail sales. "At the same time, there was a significant decrease in the PMI index in the last two months, which suggests that the situation in industry remains difficult," Glapiński noted. In his opinion, faster GDP growth is expected in the whole of 2025 than last year. "It seems to us that the resulting inflation threat is moderate," he concluded.

- Now there is such a cycle that these rates are decreasing and will probably decrease. If there is no jump in inflation - the helmsman of Polish monetary policy warned. - Such a factor could be ETS2 and the climate policy of the European Union. This could increase inflation in Poland by 2 percentage points. The EU somehow does not abandon this policy and these ideas are particularly painful for Poland - added the head of the NBP.

" Such climatic luxuries can be afforded at a certain level of development, when people have their basic needs met ," he emphasized.

The złoty is strong, it is an independent currency, independently shaping its exchange rate. Since the beginning of my term, the złoty has strengthened by 3% against the euro and by 7% against the dollar. The złoty is our bumper. We react with it, not with a change in unemployment.

We are a large and strong economy, developing rapidly. We can afford our own currency. Our currency is very strong in itself - the president of the National Bank of Poland noted

We need to make a living from using material money in circulation. The defense of cash is particularly important. Some money must be in cash, both for public safety and personal reasons - Glapiński emphasized.

"Cash will always work," he added.

"Gold reserves give us a huge amount of security. Everyone can see that we are a country that is 100% solvent, in any situation. Other banks that can afford it also have huge gold reserves. We have moved to the level of 20%, typical for developed countries," said the NBP president.

If such trends continue [falling inflation - ed.], then of course we can continue to lower interest rates. We only avoid such situations so as not to lower rates to the point that we would later have to raise them. I suspect that if there had been a decision-making meeting in August, there might not have been this reduction. If the circumstances are favorable, then there are no contraindications to another cut - Glapiński replied to Bloomberg's questions about further MPC moves.

"We are open to further rate cuts. If inflation drops to 2.5% and we predict that it will not deviate significantly from this level in the coming quarters, we will go very low with rates, " he added.

We adjust rates to inflation. If inflation is permanently in the target, then the rate will be as low as possible then. Rates can be low if inflation is also low - the NBP president answered questions from Reuters.

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