Polish Zloty Gains as NBP Keeps Rates Unchanged

Key Moments

NBP Policy Outlook Anchors Rate Expectations

ING’s Frantisek Taborsky anticipates that the National Bank of Poland (NBP) will keep its benchmark rate unchanged at 3.75% for an extended stretch, with financial markets having largely removed expectations for additional tightening.

According to Taborsky, “The National Bank of Poland is likely to leave rates unchanged at 3.75% today. This is a meeting without a new forecast and the first meeting after the March rate cut. Some MPC [Monetary Policy Committee] members indicated before the meeting that rates will likely remain unchanged for a longer period of time and some mentioned that the March cut was the last. Attention will be on the Governor’s press conference today, which will likely determine the central bank’s further direction.”

He notes that, following the announcement of a US-Iran ceasefire, interest-rate markets have sharply repriced the Polish outlook. “The market has priced out about one and a half rate hikes after the US-Iran ceasefire announcement and remains priced at less than 20bp at the one-year horizon. This is the lowest in the CEE region and rates pricing is quickly returning to normal.

If the central bank confirms its tendency to wait longer and do nothing today and, at the same time, the geopolitical situation stabilises further, we should see some pressure on the remaining rate hike pricing, although the market will probably keep some optionality here.”

Inflation Dynamics and Government Fuel Policy

Taborsky also highlights the government’s active stance in the domestic fuel market as a factor that could help contain price pressures. “On the other hand, the government has aggressively entered the fuel market, which should keep inflation under control and stay roughly within the central bank’s tolerance band. Our forecast is for rates to remain unchanged for an extended period.”

EUR/PLN Reaction and Geopolitical Drivers

The Polish zloty has already responded strongly to the shift in risk sentiment. “EUR/PLN saw its biggest one-day fall in a year yesterday, erasing roughly half of the move up from pre-conflict levels. Still, EUR/PLN and the rest of the region are mainly driven by geopolitical headlines, and today’s NBP meeting will have little impact. However, assuming that the risk-on sentiment continues and the US-Iran ceasefire holds, the zloty has further potential to erase previous losses, although reaching pre-conflict levels below 4.220 will take longer.”

Market Metrics at a Glance