Polish rate hike odds are rising, but policymakers are in no rush
The desk argues that Poland's central bank is likely to delay interest rate hikes despite rising inflation risk due to geopolitical tensions. Per the full note from ing-think, NBP Governor Adam Glapiński acknowledged inflation pressures but emphasized that these stem from external shocks rather than domestic demand. This cautious stance, anticipating potential hikes only in Q1 2027, aligns with expectations of subdued monetary policy in a complex global context, particularly as inflation recently breached NBP's upper tolerance limit of 3.5%.
What the desk is arguing
The desk presents a view of cautious optimism regarding Poland's interest rate trajectory, positing that while rate hike probabilities have increased, the central bank will not act hastily. Per the full note from ing-think, Glapiński underlined the transient nature of the current inflationary pressures, primarily rooted in external supply shocks rather than domestic conditions.
Supporting this perspective, the NBP's recent decision to maintain rates was influenced by a global energy supply shock, notably exacerbated by ongoing geopolitical conflicts. Polish inflation rose above the NBP's target in September, yet the central bank projects a potential return to this range by October, reflecting confidence in managing local inflation dynamics.
The alternative read would suggest a more aggressive monetary tightening could be warranted should domestic inflationary pressures escalate unexpectedly, potentially disrupting the existing policy framework.
Where it sits in our coverage
Our current consensus target for the EUR/PLN pair is set at 1.075, closely tracking expectations of NBP's monetary policy. Notable firm forecasts include: - jpmorgan: 1.10 (Mar 26) - bofa: 1.04 (Mar 26)
This perspective aligns closely with jpmorgan, which anticipates a gradual tightening, but it diverges from bofa's more conservative estimate, suggesting potential volatility in the currency pair as traders navigate these forecasts.
How other firms see it
Generally, firms like jpmorgan and socgen echo concerns about inflation while supporting a gradual approach to rate hikes. Conversely, bofa maintains a more bearish position, arguing for a constrained monetary response.
Monitoring EUR/PLN closely is pivotal due to its direct correlation with NBP's policy adjustments and broader European monetary landscape, particularly as the Eurozone wrestles with its own inflation challenges and economic recovery efforts.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01NBP's cautious approach suggests no immediate rate hikes despite inflation risks.
- 02Global energy supply issues remain a dominant factor in price stability.
- 03The timeline for potential rate hikes is now pushed to Q1 2027 as per NBP's guidance.
- 04The forecast landscape shows divergence among major banks on future PLN performance.
Market implications
Traders should keep an eye on the EUR/PLN as it approaches critical levels around 1.075, indicating potential resistance or support based on NBP's communications. The developments in the energy markets will likely drive sentiment in the coming weeks, with November's inflation data serving as a key marker for future direction.
Risks to this view
Should Poland's domestic inflation sharply increase due to unforeseen domestic demand pressures or further energy price spikes, the NBP may be forced to accelerate its rate hike schedule unexpectedly, invalidating the current thesis of a prolonged hold.
Articles Polish rate hike odds are rising, but policymakers are in no rush Published 15:59 Poland Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The tone of the NBP Governor’s press conference was broadly in line with our forecast, assuming the next hike in first quarter 2027. He recognised rising inflation risks linked to geopolitical tensions and solid domestic demand. There are concerns of higher energy prices feeding into the economy.
The central bank appears willing to wait to raise rates Rafal Benecki and Adam Antoniak In today's press conference, National Bank of Poland Governor Glapiński acknowledged higher inflation but seems willing to wait to raise interest rates During his October press conference, National Bank of Poland (NBP) Governor Adam Glapiński highlighted growing risks to the inflation outlook. At the same time, however, he stressed that the rise in prices so far has been driven by an external supply shock and that there is little evidence of higher energy costs spreading broadly to the prices of other goods and services. Global sources of inflation Explaining the rationale behind the October decision to leave interest rates unchanged, NBP Governor Adam Glapiński stressed that the global economy is facing an energy shock resulting from the conflict in the Middle East.
The conflict is becoming more protracted, and its inflationary effects are intensifying. Polish inflation rose above the upper bound of the NBP's tolerance band around its target in September (2.5%; +/-1 percentage point), but it should return to that range in October. Local inflationary factors are in play In the governor's view, the inflation outlook is subject to greater uncertainty due to the geopolitical tensions.
Moreover, the cuts to fuel excise duty and VAT are temporary and, at present, are expected to remain in place until the end of 2026. Adam Glapiński also listed a number of risk factors that could contribute to broader-based price increases: Consumer demand is solid, while wage growth in the corporate sector is running at around 6% year-on-year. Economic conditions are improving in Poland's external environment, including in Germany.
Global agricultural commodity prices are rising, which could lift inflation in Poland in the future. Fiscal policy remains expansionary. Strong growth in producers’ prices (PPI) may signal mounting cost pressures.
He therefore reiterated that the main Monetary Policy Council (MPC) objective is to prevent higher fuel prices from spilling over into other prices across the economy. Inflation still primarily driven by a supply shock, no second-round effects Balancing the risks outlined above, the MPC chairman also emphasised that almost all the increase in inflation to date has resulted from higher fuel prices. In September, energy accounted for 60% of inflation, while the pass-through from energy prices to other prices has remained limited.
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