Polish economic data supports our call for rate hikes in early 2027
The desk views the recent Polish economic data as reinforcing the expectation of interest rate hikes in early 2027, as indicated by the more hawkish tone from the Monetary Policy Council (MPC). According to the analysis provided by ing-think, despite a slowdown in GDP growth to 3.5% year-on-year and core inflation falling below 3%, the MPC's projections for high inflation in 2027 support a base case of a 50 basis point increase. This commentary suggests a more aggressive monetary policy response in the face of economic challenges, particularly as net exports have turned negative and household consumption remains under pressure due to rising prices and elevated household savings rates. The desk anticipates that these dynamics could shift investor sentiment towards Polish assets in the medium term, particularly given the consensus views from peer firms on interest rates and currency forecasts.
What the desk is arguing
The desk is interpreting the Polish economic slowdown as a harbinger for upcoming rate hikes, aligning with the hawkish sentiment from the MPC. Per the full note from ing-think, the predicted inflation spikes in 2027 are central to this outlook, despite the current core inflation falling below 3% YoY.
Notably, GDP growth decelerated from 4.1% to 3.5% YoY in 3Q26, while private consumption growth is under duress. As household incomes are squeezed by rising prices and geopolitical uncertainty, the MPC’s shift is seen as a proactive rather than reactive measure in an effort to curb possible inflationary pressures following a period of stagnation.
Where it sits in our coverage
Our coverage reflects a consensus target for the Polish zloty (PLN) against the euro (EUR/PLN) at 1.075, with estimates varying significantly among firms, including: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This analysis suggests a moderate divergence, with our target sitting slightly above the median of its range. Notably, jpmorgan aligns with a bullish stance, while bofa appears more cautious and skeptical about the rate hike timeline.
How other firms see it
While some firms, led by jpmorgan, back the outlook for rate hikes based on inflation concerns, contrary views from bofa suggest a more subdued future economic climate that could hinder aggressive monetary policy.
With the potential for adjustments in the EUR/PLN trajectory signaling broader sentiment shifts, watch for developments in related forecasts from the NBP and inflation reports as critical markers for future rate decisions.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Poland's GDP growth slowed to 3.5% YoY in 3Q26, reflecting weakened consumption and exports.
- 02Core inflation has dropped below 3%, but the MPC signals plans for rate hikes in early 2027.
- 03Household consumption pressures arise from rising costs and geopolitical uncertainties.
- 04The monetary policy outlook appears hawkish, with projections for higher inflation influencing rate decisions.
Market implications
Traders should watch the 1.075 level for potential support as the outlook for rate hikes becomes more certain. Focus on upcoming employment data and CPI releases that could impact MPC decisions.
Risks to this view
A rapid decline in inflation or a significant improvement in consumer sentiment could invalidate the bullish rate hike outlook, shifting the MPC back to a more dovish stance.
Articles Polish economic data supports our call for rate hikes in early 2027 Published 10:45 Poland Translate Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Poland’s economy slowed in the third quarter, while core inflation fell below 3% YoY. There is still little evidence of second-round effects. The MPC has nevertheless turned more hawkish with staff projecting high inflation next year, supporting our base case of 50bp of rate hikes in early 2027 Rafal Benecki and Adam Antoniak Poland’s economy slowed in the third quarter GDP growth slowed in 3Q26, similar to other economies in the region According to the preliminary estimate, GDP growth slowed to 3.5% YoY in 3Q26 from 4.1% YoY in 2Q26.
Seasonally adjusted data point to a slowdown in growth to 0.8% QoQ from 1.1% QoQ in the previous quarter. We will learn the breakdown of GDP growth for 3Q26 on 30 November, but the available data suggests that growth in industrial gross value added slowed, while construction activity declined in annual terms. Continued solid growth in services was not enough to offset weaker performance in these areas.
On the expenditure side, the main reason for slower growth last quarter compared with 2Q26 was a deterioration in net exports, ie, the foreign trade balance. Net exports added 0.5ppt to annual GDP growth in 2Q26, while we estimate that the contribution turned slightly negative in 3Q26. Private consumption growth probably slowed further as well.
With nominal wage growth normalising and inflation rising, household incomes came under pressure. Higher spending on fuel is limiting households’ ability to increase consumption elsewhere. Geopolitical uncertainty also remains elevated, resulting in a persistently high propensity to save.
Slower GDP growth, including weaker consumer demand, is an important factor limiting inflationary pressure. This marks a significant difference from the previous energy shock in 2022, which was accompanied by strong income growth and a consumption boom. Under current conditions, it is more difficult for companies to raise prices and pass higher energy costs on to consumers.
Price competition in retail also remains intense, while Poland continues to face strong competitive pressure from Chinese imports. GDP growth moderated in 3Q26 GDP, %YoY, NSA Source: GUS, ING. "> Source: GUS, ING. October CPI inflation confirmed at 3.5% YoY, with core inflation falling below 3% YoY According to the final estimate, CPI inflation fell to 3.5% YoY in October from 4.1% YoY in September.
This was mainly due to a decline in fuel prices (-9.7% MoM), related to cuts to excise duty and VAT on petrol and diesel. Growth in food and non-alcoholic beverage prices also remained low at 0.4% MoM, although we are approaching the end of the period of annual deflation in this category that began in June this year. The impact of the energy crisis was, however, visible in housing energy prices, which rose by 1.7% MoM, mainly because of higher prices for solid fuels (7.4% MoM, including an 11.2% MoM rise in coal) and liquid fuels (2.9% MoM).
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