Key Moments
- Headline inflation in Poland moved down from 3.1% to 2.5%, matching the National Bank of Poland’s official target.
- Market pricing has shifted from potential rate hikes to rate cuts, with about 10bp in longer-term easing now reflected in rates.
- EUR/PLN has tested the 4.300 resistance level and could move higher if the NBP signals readiness to cut rates.
Soft Inflation Data Shifts Policy Expectations
ING strategist Frantisek Taborsky highlighted that the latest reading of Polish inflation reached 2.5%, aligning exactly with the National Bank of Poland’s (NBP) target and dropping from the previous 3.1%. He emphasized that the decline was broad-based across the consumer basket, with food prices again acting as the primary driver of the downside surprise.
According to Taborsky, core inflation likely remained relatively steady, with an internal estimate in a narrow range of 3.0-3.1%. This suggests underlying price pressures may not have eased as sharply as the headline figure.
Market Reprices Path of Interest Rates
Taborsky noted that the latest data has pushed investors to remove any expectation of further rate hikes from the NBP. Instead, the market has started to factor in the possibility of monetary easing, with around 10bp of rate cuts now embedded in longer-term pricing.
At the same time, he maintained the view that inflation may pick up again toward the end of the year, which in his assessment should keep the NBP’s policy rate unchanged for an extended period despite the current dovish repricing.
Implications for the Zloty and EUR/PLN
In the near term, Taborsky pointed out that the shift in rate expectations is likely to put downward pressure on market rates, which in turn may erode the Polish zloty’s recent resilience. He observed that EUR/PLN has already moved up to test the 4.300 level, which continues to act as strong resistance for now.
Taborsky added that any indication from the NBP next week that it is open to cutting rates could serve as a catalyst for EUR/PLN to extend its move higher.
Key Figures and Market Levels
| Indicator / Market | Latest Detail |
|---|---|
| Headline inflation | Fell from 3.1% to 2.5% (NBP target) |
| Estimated core inflation | Between 3.0-3.1% (ING estimate) |
| Rate expectations | All hikes priced out; around 10bp of cuts priced in longer term |
| EUR/PLN | Tested 4.300, which remains strong resistance |
Original Analyst Commentary
“Yesterday’s June inflation in Poland brought another surprise to the downside, with a decrease from 3.1% to 2.5%, exactly the target of the National Bank of Poland.”
“Although food prices were the main surprise to the downside in May, in June we saw a decrease across the entire basket, but food again remains the main factor. Core inflation is unlikely to have changed much, with our estimate between 3.0-3.1%.”
“The market has priced out all rate hikes and now dovish numbers support pricing rate cuts with around 10bp priced in the longer term.”
“We still expect some deterioration in inflation towards the end of the year, which should leave the National Bank of Poland policy rate unchanged for a longer period.”
“But in the meantime, we can see pressure on lower market rates which should further undermine the zloty’s strength.”
“EUR/PLN tested 4.300 as we expected, but for now this level remains strong resistance.”
“If the NBP indicates openness to a rate cut next week, it could be a signal for EUR/PLN to continue higher.”
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