Poland's central bank raised its main interest by 25 basis points in September, the lowest rise in the current rate hike cycle so far, as it expects lower growth and continued inflationary pressure, it said on Wednesday.

Rate setters at the central bank (NBP) launched a policy tightening cycle last October in an effort to curb rising inflation.

"In order to reduce this risk, i.e. striving to decrease inflation to the NBP target in the medium term, the Council decided to increase NBP interest rates again. The increase of the NBP interest rates will also curb inflation expectations," the central bank said in a statement.

The economy contracted in the second quarter of 2022 by 2.1% from the previous three months, with the central bank adding that further declines in GDP growth could be on the horizon. Year-on-year growth was 5.5% in the second quarter, official data shows.

Central Europe's rate setters were the quickest last year to begin raising interest rates and accelerated the pace of hikes this year as inflation surged, but some are starting to cool or possibly end their tightening cycles.

The Czech central bank was the first to call a halt to its rate-hike cycle in August, leaving rates at 7.00%, although it has not completely shut the door on chances of another hike.

Analysts expect the tightening cycle to continue in Poland.

"The (Monetary Policy) Council continues to emphasise the slowdown in economic activity, which is not new. The gate for further increases remains open, and rightfully so. The depth of the slowdown will determine when we end the cycle," an mBank economist said on Twitter.

Poland's central bank governor Adam Glapinski said in August that the Monetary Policy Council (MPC) could raise rates at least once or twice more by 25 basis points if necessary, although Poland's Prime Minister Mateusz Morawiecki said he expects the rate hike cycle to end soon.

The MPC raised the main interest rate by 50 basis points to 6.5% in July. Data released last month showed inflation reached 16.1% in August, the highest in more than two decades.

The central bank added in its statement that "further decisions of the Council will depend on incoming information regarding perspectives for inflation and economic activity, including the impact of the Russian military aggression against Ukraine on the Polish economy."