Polish inflation returns to the central bank’s target in June
Recent data indicates a noteworthy shift in Polish inflation dynamics, as CPI fell to 2.5% in June, aligning with the National Bank of Poland's target. This marks a continued trend of lower inflation, with food prices contributing significantly to the decrease, as highlighted in the note from ING. The desk interprets this as a strong indicator that the NBP is unlikely to hike rates in the near term, which may lead to speculation around potential rate cuts later in 2026. Per the full note source, the combination of declining fuel costs and a notable drop in food prices has allowed inflation to stabilize effectively after previous fluctuations.
What the desk is arguing
The recent dip in Polish inflation to 2.5% effectively meets the National Bank of Poland’s target, indicating a shift in monetary policy considerations. According to ING's assessment, declining food prices were a critical factor driving this downward surprise for the second consecutive month, demonstrating a stabilizing trend in the economy.
Specifically, the data revealed a 7.4% month-on-month decrease in fuel prices, correlating with a significant drop in crude oil prices. The unusual monthly decline in food and non-alcoholic beverage prices by 0.7% MoM further supports the notion that inflationary pressures are subsiding, allowing policymakers some breathing room before considering any interest rate adjustments.
Where it sits in our coverage
Currently, our consensus target for the Polish Zloty (PLN) against the Euro is 1.075, with a range of expectations between 1.04 and 1.12, reflecting varying outlooks across several firms. Notable targets from key institutions include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This perspective aligns with jpmorgan, suggesting that our position is comfortably mid-range compared to the broader consensus, particularly leaning towards a stable trajectory given the ongoing inflation metrics and statements from the NBP.
How other firms see it
Most firms, including jpmorgan, align with the view that the NBP will maintain current interest rates in light of the recent inflation data. In contrast, firms like bofa advocate for potential rate cuts by late 2026 given the softer inflation readings.
Shifts in EUR/PLN will likely reflect the evolving narrative from the NBP and general sentiment flowing from Central Europe, particularly as analysts watch for developments in regional banking and fiscal policies.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Polish CPI inflation fell to 2.5% in June, hitting the NBP target.
- 02Decreasing food and fuel prices contributed significantly to this stabilization.
- 03Market expectations for rate cuts may begin to form as inflation pressures ease.
- 04Our consensus target for PLN is 1.075, with a notable range indicating market uncertainty.
Market implications
Traders should monitor the PLN's reaction to subsequent NBP communications, particularly regarding any guidance around interest rate decisions in light of this inflation data. The 1.075 level could serve as a pivotal point for market positioning as expectations evolve.
Risks to this view
A reversal in this outlook could stem from unexpected geopolitical tensions affecting commodity prices or signals from the NBP indicating a shift towards tightening policy again if inflation trends change direction.
Older quick take Quick take 10:35 Polish inflation returns to the central bank’s target in June Polish CPI inflation surprised to the downside for the second month in a row. It has now reached the National Bank of Poland's target of 2.5%, with food prices continuing to fall. Markets had already priced out rate hikes ahead of the June flash CPI, but some investors may now start speculating on rate cuts in 2H26.
We expect rates to remain on hold for now Falling food and non-alcoholic beverage prices proved the main surprise in today's data, and are now lower than they were a year ago Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Adam Antoniak Senior Economist, Poland Polish CPI inflation fell to 2.5% year-on-year in June (ING's expectation: 2.9%; consensus: 2.7%), down from 3.1% YoY in May, according to the flash estimate from Poland Statistics (GUS). For the second consecutive month, inflation surprised on the downside and is now exactly at the National Bank of Poland’s (NBP) inflation target. This suggests there is no need for interest rate hikes, as the recent oil price shock did not generate a lasting inflationary impulse.
As expected, June saw a sharp decline in fuel prices (-7.4% month-on-month), supported by the fall in crude oil prices from above US$100/bbl throughout most of May to just over US$70/bbl currently. This allowed retail fuel prices to decline despite the reinstatement of the higher excise duty rates that had been in place at the beginning of 2026. The main surprise, however, was a second consecutive and sizeable monthly decline in food prices.
Prices of food and non-alcoholic beverages fell by 0.7% MoM in June, following a 1.0% MoM decline in May, and are now lower than a year ago. A modest decline was also recorded in energy prices (-0.4% MoM). According to our estimates, core inflation, excluding food and energy, remained broadly unchanged from May at around 3.0-3.1% YoY.
The June inflation reading leaves the Monetary Policy Council in a comfortable position. Inflation is now at target, while the oil market shock has generated only a limited inflationary impulse, largely confined to fuel prices. At the same time, disinflationary – and in the case of food, outright deflationary – trends have persisted in other categories.
Even before the June inflation release, markets had already priced out bets on rate hikes. Less than three weeks ago, FRA contracts were pricing in at least three 25bp interest rate hikes. We expect that market attention will now shift towards the possibility of NBP rate cuts in the second half of 2026.
Our baseline scenario assumes that the central bank’s policy rates will remain unchanged in the coming months (with the reference rate staying at 3.75%), and that the MPC’s next move will be a rate cut rather than a rate hike. From today’s perspective, it appears that the war in the Middle East interrupted the monetary policy adjustment cycle, but that the NBP could return to easing if the medium-term inflation outlook continues to improve. The July inflation projection should provide the Council with a better assessment of current inflation dynamics and the potential scope for monetary policy easing.
Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Older quick take
Sources & References
How we cover this story