National Bank of Poland preview: In a sweet spot for now
The National Bank of Poland (NBP) is expected to maintain its current interest rate at 3.75% during the upcoming July meeting, as inflation has recently stabilized at the target level of 2.5%. Per the full note from ing-think, the central bank is likely in a "wait-and-see" mode, with no rate cuts anticipated in the immediate future despite fluctuations in global oil prices. Market expectations have shifted significantly, moving from forecasts of multiple rate hikes to the possibility of cuts later in the year, but our desk maintains that the rates will remain untouched through at least year-end 2026.
What the desk is arguing
The desk anticipates that the NBP will keep interest rates steady at 3.75% during the meeting on July 9 due to recent inflation stabilization. According to ing-think, inflation has returned to the NBP's target of 2.5%, with any potential future rate cuts remaining unlikely in the near term.
Recent strong inflation readings were attributed to temporary energy shocks, but the desk believes that with June's CPI aligning with the target, the Monetary Policy Council will focus more on a cautious approach rather than aggressive changes. Thus, the consensus is to hold rates unchanged through 2026, with potential discussions around cuts cropping up later in the year.
Where it sits in our coverage
Our internal assessment projects a consensus target range for the Polish Zloty around 1.075 with boundaries of 1.04 to 1.12 against a basket of currencies. Notably, jpmorgan holds a target of 1.10 for a March 2026 maturity, while bofa is below consensus at 1.04 for the same tenor.
This perspective aligns with our peers’ expectations for stability in NBP rates, and the desk's call aligns centrally within the outlined spread, suggesting limited volatility in Poland's monetary stance for now.
How other firms see it
Various firms generally expect similar outcomes, with majority expecting a stable rate environment. Aligned firms include jpmorgan, supporting our view, while bofa diverges with a more bearish target.
For traders, the EUR/PLN dynamics could offer insight into how regional economic factors might influence the Zloty's performance. Additionally, keep an eye on Poland's GDP reports, which could serve as bellwethers for broader economic health and central bank decision-making.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01NBP likely to maintain interest rate at 3.75% in July.
- 02Inflation has stabilized back at the target of 2.5%.
- 03Discussion on potential rate cuts may emerge later in the year.
Market implications
Traders should watch for any signals in the upcoming press conference from NBP Governor Adam Glapiński, as a dovish tone could prompt shifts in market positioning. Moreover, monitoring the EUR/PLN trajectory might provide additional clues on the Polish currency's responsiveness to regional monetary signals.
Risks to this view
If inflation metrics show unexpected spikes or the energy price dynamics shift significantly, this could prompt the NBP to reconsider its current dovish stance. A scenario involving heightened global economic risks could also catalyze a shift towards more aggressive monetary policy adjustments.
Articles National Bank of Poland preview: In a sweet spot for now 09:51 Poland Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download With inflation back at the 2.5% target in June, we think the Polish central bank is likely to maintain its wait-and-see stance on 9 July. Rate hikes are off the table, while cuts remain unlikely in the near term. Rates should stay unchanged through year-end, although easing discussions may re-emerge later this year Rafal Benecki and Adam Antoniak NBP Governor Adam Glapiński could opt for a more dovish tone at Thursday’s press conference, but the debate over potential rate cuts is only likely to gather momentum after the summer The impact of the energy shock linked to the conflict in the Middle East appears to have been short-lived, and the pass-through of high oil prices on core inflation more limited than expected.
Although the spike in oil prices and the subsequent rise in petrol prices pushed Poland’s consumer inflation from around 2% at the beginning of the year to above 3% in March and April, CPI inflation came in well below market expectations in May and June. According to the flash estimate, headline inflation stood exactly at the National Bank of Poland’s target of 2.5% last month. The easing of the oil shock and the temporary nature of the rise in headline inflation have altered market perceptions of the monetary policy outlook.
At the beginning of June, rate forwards were pricing in more than three rate hikes, whereas by the start of this month some investors had already begun betting on rate cuts later this year. Our views are less volatile. Throughout the US-Iran war, we held the view of flat NBP rates.
Now, our baseline scenario also assumes that rates remain unchanged (at 3.75%) until the end of 2026, as we see CPI slightly above the 2.5% year-on-year target for the rest of this year. We expect the Monetary Policy Council to leave rates unchanged in July and maintain its wait-and-see stance. The easing cycle in Poland was interrupted by turmoil in the Persian Gulf, but policymakers will require greater confidence in a favourable inflation outlook before resuming monetary easing.
So far, the decline in inflation has largely been driven by normalising oil prices and unexpectedly sharp falls in food prices. Core inflation remains close to 3%. Moreover, fiscal measures aimed at reducing petrol and diesel prices, including lower excise duties and VAT rates, expired at the end of June, pushing fuel prices higher at the start of July.
The July macroeconomic projection is likely to present a favourable medium-term inflation outlook, but we believe policymakers will need several months to convince themselves that the economy is avoiding lagged inflation effects of energy or supply chain shocks, especially on the core CPI side. While Governor Adam Glapiński may strike a somewhat dovish tone at Thursday’s press conference, the debate over potential rate cuts is only likely to gather momentum after the summer. As the likelihood of further rate hikes from the European Central Bank has diminished and additional monetary tightening by the Federal Reserve this year appears increasingly doubtful, the external negative pressure on the zloty should diminish.
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