Economic news

• INFLATION: The CPI inflation for November was revised upward from 2.4% to 2.5% yoy – according to final reading by the Polish Statistical Office today. The initial number surprised strongly to the downside (consensus was 2.6% yoy) and facilitated the interest rate cut on the MPC meeting last week. The revised number is slightly higher but still should be considered low. We think that despite accelerating GDP growth the inflation rate in Poland will remain very close to the NBP target (2.5% yoy) for the months to come due to subdued wage growth and low energy prices.   
• MONETARY POLICY:  
  • I. Dąbrowski, a member of the Monetary Policy Council (MPC), indicated that not all Council members may be willing to wait until the March projection before proceeding with further interest rate cuts; however, in his view, a deceleration of the easing cycle and a certain delay constitute a non-controversial scenario for the Council. Dąbrowski also assessed that, when discussing the terminal level of interest rates, the Council should aim to align real interest rates with the external environment. This implies that, within the monetary policy transmission horizon, policy rates could potentially be reduced to levels even below 3%.  
  • On the other hand, I. Duda, another member of the MPC, assessed that the most likely timing for resuming interest rate cuts would be March 2026, when the Council reviews new macroeconomic projections. She noted that the beginning of the year would not be an appropriate moment for rate reductions due to numerous price adjustments, including administered prices. Duda also stated that the MPC does not discuss a specific terminal level of interest rates at its meetings, focusing instead on stabilising medium-term CPI dynamics; nevertheless, in her view, the terminal rate should fall within the 3.50–3.75% range.  
  • P. Litwiniuk, another member of the MPC, reaffirmed this view, stating that a limited room for an additional interest rate cut remains and in his view such an adjustment could take place around March. In our assessment, the MPC will cut the reference rate to 3.50% in the first half of 2026, which would open room for a broader discussion on the terminal policy rate. 

Financial market update

Last week, the PLN demonstrated notable strength. Against the euro, it appreciated from just under 4.24 on Monday to slightly above 4.22 on Friday. These two levels also define the boundaries of the horizontal trend in which EUR/PLN has been trading for the past month. Nevertheless, this week a downside breakout from this range should be expected, or at least attempts in that direction. The appreciation of the PLN last week was driven by a weak US dollar. USD/PLN fell below 3.60, reaching its lowest level since September. In the coming days, there is scope for this low to be challenged further, as no meaningful dollar strengthening is currently anticipated. Meanwhile, the domestic interest rate market continues to move in line with core markets, which at present implies a steepening of the yield curve. The upcoming week should bring a continuation of this trend, with yields at the short end declining and those at the long end rising.