Zloty Under Scrutiny as NBP Signals Caution on Inflation

Key Moments

NBP Decision in Focus as Markets Watch Zloty

Commerzbank strategist Tatha Ghose notes that investors are primarily focused on the Polish National Bank’s policy guidance rather than an immediate change in interest rates. The central bank is expected to leave its key rate anchored at 3.75% in October, aligning with market consensus.

The accompanying press conference on Thursday is seen as the main catalyst for market reaction. Market participants are looking for any indication from NBP Governor Adam Glapinski that rate hikes may be formally considered in the near term.

MPC Signals Possible Tightening if Inflation Remains Elevated

Comments from members of the Monetary Policy Council suggest a growing willingness to debate policy tightening. According to Ghose, Ludwik Kotecki anticipates that a rate-hike discussion will take place in October, even if no move is taken immediately. Kotecki views the updated macroeconomic projections due in November as a potential trigger for one or two 25 basis point increases, provided that the forecasts show inflation running above 4% even next year.

Inflation Dynamics Strengthen the Case for a Shift

Recent inflation data are described as supportive of a more hawkish stance. Headline Consumer Price Index (CPI) rose to 4% year-on-year in September, up from 3.4% year-on-year in August. Ghose emphasizes that the annual rate alone does not capture the full picture, pointing to a seasonally adjusted month-on-month CPI increase of 0.62% after smoothing. This calculation indicates that underlying price momentum has re-accelerated to a pace above the central bank’s target.

Regional Contrast: Czech Republic vs. Poland

Ghose also highlights a contrast within the region. He notes that the Czech National Bank (CNB), despite facing weaker inflation momentum than Poland, is expected to raise rates in November. By comparison, the NBP appears more inclined to wait for the November projections and potentially tolerate an inflation overshoot before responding.

According to the analysis, this relatively easier monetary policy stance is likely to weigh on the Polish Zloty’s exchange rate. Ghose argues that the pressure on PLN could persist unless Thursday’s communication marks a clear shift toward a more restrictive tone.

“Poland’s National Bank (NBP) will announce its October monetary policy decision later this afternoon: consensus anticipates the base rate will remain unchanged at 3.75%. The press conference on Thursday will hold more interest, as usual, because the question is whether Adam Glapinski will officially signal that rate hikes are on the cards.”

“MPC comments already point in this direction. Ludwik Kotecki expects a rate-hike discussion in October, although probably not a move, and sees November’s new macroeconomic projections as a basis for one or two 25bp increases, if the projections feature faster than 4% inflation even next year.”

“The inflation data justify this shift. Headline CPI accelerated to 4% y/y in September from 3.4% y/y in August. As usual, the year-on-year number is not sufficient: we calculate the seasonally-adjusted month-on-month increase at 0.62% m/m after smoothing. Underlying CPI momentum has therefore re-accelerated to faster than target.”

“The comparison with the Czech Republic is also telling: with less inflation momentum, CNB is expected to hike its rate in November, while NBP appears inclined to wait for projections and sit through the inflation overshoot if it could. NBP’s easier monetary stance will keep up the pressure on the zloty exchange rate unless the tone shifts markedly on Thursday.”