CEE & CCA week ahead: Polish rate decision and inflation data across Central Europe
Lead — The upcoming Polish rate decision presents a transient period for the zloty amid rising inflation pressures, as expected policy inertia may fuel uncertainty in investor sentiment. Per the full note from ing-think, while the National Bank of Poland (NBP) is projected to keep rates at 3.75%, this stability stands against a backdrop of shifting inflation dynamics, suggesting that November may usher in a more active monetary discourse. This juxtaposition is critical as traders calibrate for potential volatility surrounding inflation readings due next week from Hungary and the Czech Republic.
What the desk is arguing
The NBP's anticipated hold on rates this week reflects a cautious approach amid externally driven inflation. The source highlights that while Poland's inflation read reached 4.0% YoY in September, primarily due to energy costs, the absence of broad-based price increases has allowed the central bank to maintain its current stance a bit longer. Notably, core inflation appears to have declined, further mitigating immediate rate hike pressure.
However, the upcoming macroeconomic projections from the NBP in November may provide a critical pivot point, as the central bank weighs these inflation figures alongside economic conditions. This scenario indicates reduced urgency for tightening, yet also underscores the necessity for prudence among traders observing policy shifts in regional counterparts.
Where it sits in our coverage
The desk’s analysis suggests a cautious perspective given the consensus across the board, which anticipates a static rate environment in the near term. While there is no defined target range available, some firms forecast potential rate hikes towards the end of 2026. As a reference point, hsbc and ing share sentiments leaning towards a gradual policy normalization in alignment with macroeconomic indicators.
How other firms see it
While many firms remain aligned with a neutral stance on Polish rates, outlooks differ on the timing and magnitude of future hikes. hsbc favors a more aggressive rate hike strategy should inflation persist, whereas bofa suggests a more cautious path based on current fiscal dynamics.
Relevant currency pairs to monitor include EUR/PLN, which could react to both NBP's decision and the broader CEE inflation trends, as well as fluctuations in USD/PLN, reflecting dollar strength against anticipated regional economic data.
What the calendar says
Inflation data releases across Central Europe this week, particularly from Hungary and the Czech Republic, will be pivotal in shaping regional currency reactions. Traders should remain alert to these data points as they could impact the zloty's near-term performance following the NBP decision.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Poland expected to maintain interest rates at 3.75% amid rising inflation concerns.
- 02Inflation in Poland peaked at 4.0% YoY primarily due to external energy shocks.
- 03Core inflation potentially declining, reducing immediate rate hike pressure.
- 04November NBP projections may create a pivotal point for future monetary policy.
Market implications
Watch for impacts on EUR/PLN as inflation data comes in from Hungary and the Czech Republic, with potential volatility as traders adjust expectations. The zloty may react sensitively to any signals of impending rate discussions later this year.
Risks to this view
Key risks to this outlook include unexpected spikes in core inflation within Poland or accommodative monetary policies from regional peers that could prompt a reevaluation of the NBP's stance. Additionally, geopolitical factors affecting energy prices could also alter the inflation trajectory significantly.
Articles CEE & CCA week ahead: Polish rate decision and inflation data across Central Europe Published 11:25 Czech Republic Hungary Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Poland is expected to leave rates unchanged next week, while Hungary, the Czech Republic and Turkey release September inflation data alongside key activity figures Adam Antoniak , Peter Virovacz , David Havrlant and Muhammet Mercan Adam Glapiński, Governor of the National Bank of Poland Poland: NBP expected to leave rates unchanged We expect the National Bank of Poland (NBP) to leave interest rates unchanged on Wednesday 7 October, with the reference rate remaining at 3.75%. On the one hand, headline CPI rose to 4.0%YoY in September, moving well above the central bank's 2.5% target (+/- 1 percentage point). On the other hand, inflation is solely being driven by an external energy shock, with no clear signs of broader inflationary pressures or second-round effects.
Core inflation likely declined last month, while fuel and household energy prices account for around 2.5 percentage points of annual inflation. This means policymakers still have some time before taking any policy action. We believe the debate on monetary tightening may begin in November, when the NBP publishes its new staff macroeconomic projections.
We continue to expect rates to remain unchanged for the rest of this year, although we see scope for 50bp of rate hikes in early 2027. Hungary: Higher fuel prices set to push inflation up We expect the favourable underlying budget performance to continue in Monday's data release. Following an August deficit caused by a high volume of RRF prepayments, we expect a rebound in September, primarily due to seasonal tax payments.
Tuesday sees the release of industrial output and retail sales data. This is going to be extremely important, as it will involve the impact of the significant summer heatwave, the almost full shutdown of the Paks Nuclear Power Plant, and the voluntary energy reduction activities of households and companies. Consequently, we anticipate a substantial monthly decline in industrial production.
Extreme weather conditions have traditionally had a positive impact on retail sales. However, this time, it was met with skyrocketing fuel prices and plummeting fuel sales. Therefore, we expect these two impacts to cancel each other out.
Inflation data will be released on Wednesday. Following the upside surprises across Europe, we are now incorporating this into our inflation forecast for Hungary in September. We are anticipating a significant increase in headline inflation, with fuel prices accounting for around 75% of the acceleration.
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