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Macroeconomic scenario

Economic growth

The GDP details for the third quarter slightly shift the pendulum from private consumption to investment, but do not change the GDP forecast for the whole year. We continue to expect GDP growth of 3.6% with a solid contribution from consumption (3.6%) and an acceleration in investment (5%). Noteworthy is the rebound in exports, the weakness of which has so far prevented GDP growth from accelerating by more than 3-3.5%. We maintain our view that in 2026 the growth rate of Polish GDP will accelerate to 4%.

Inflation

Inflation has reached the NBP target and will remain close to it throughout 2026. Price pressures remain subdued: the absence of signs of an increase in commodity, energy and fuel prices is dampening commodity inflation, and the gradual fading of wage pressures is dampening the growth of services prices. Despite the fast growth rate, the Polish economy does not generate internal inflationary pressure, mainly due to the persistently negative output gap. In the absence of new supply shocks, domestic factors are currently acting disinflationarily, stabilising the path of inflation over the medium term.

Labour market

In recent months, there has been some positive news from the Polish labour market. First of all, we learned that the number of employees in Poland, according to the LFS survey, increased in 3Q25 to 17.3 mn people – the highest level in history. Secondly, in the autumn, the employment of foreigners in Poland, especially from Ukraine, began to accelerate again. This suggests that the demand for labour in our country is still strong, despite the negative signals sent by the unemployment rate or falling employment in the corporate sector. However, the pace of wage growth is slowing down faster than expected and it can no longer be said that wage costs generate inflationary pressure. They grow at a rate proportional to productivity growth.

Monetary policy

Wages, inflation, core inflation... It is difficult to find arguments against the continuation of interest rate cuts in macro data. In our opinion, the MPC will quickly reach the target rate of 3.5%. In December this year, there will be no pause and interest rates will fall by 25 bps, and the first months of 2026 will bring us further cuts by a total of 50 bps. The discussion on the target rate and when the cycle will end is fast approaching.

Financial markets

The consensus begs for surprises

If forecasts are to be believed, 2026 will be another year in which nothing significant will happen: the dollar is expected to be weaker, Fed rates will fall, the AI/tech boom will continue, the US economy will avoid recession again, and the European economy will avoid boom. This is not a recipe for fireworks and most likely such a boring scenario will not come to fruition. Markets often get it wrong in such situations – betting collectively on a strong dollar a year ago is a recent example of a spectacular consensus blunder. However, before the consensus views are falsified, we are facing the Christmas and New Year period, which is not conducive to directional bets and large movements in the markets. Instead, trends are likely to continue where it makes sense, or relative valuations (e.g., major currency pairs) are likely to stabilize.

However, this does not mean that nothing will happen in the coming weeks. First, the Fed will continue to cut interest rates, but it will do so without enthusiasm. However, markets have learned not to take "dots" literally. Interest rates will fall faster and harder than FOMC members think. Second, the government agencies responsible for the publication of U.S. statistics will be catching up with the government shutdown period. In particular, this week we will get to know the data from the labour market from the last two months. This publication itself has the potential to overturn many market certainties. 

Peace in Ukraine, another test

Observing the domestic markets, we have the impression that Polish assets are still in demand and the dominant direction of movement on their valuations is upwards. Nevertheless, this does not mean a breakthrough and the key FX and FI market benchmarks (EUR-PLN and 10Y POLGB, respectively) setting new lows. In the wake of the decline in NBP rates, the short end of the curve should dip though. The result is a further steepness of the yield curve.

If the EUR-PLN is still not able to break 4.22 and the yields on the 10-year bond cannot go below 5.20%, what could lead to a breakthrough there? Peace talks on the conflict in Ukraine offer some possibility. The market reacted with restraint to the news so far and it has every right to be skeptical. Investors buying Polish assets are still demanding a premium for geopolitical risk. In our opinion, it is not large, but we will see its absence in the quotations.

Other factors driving the Polish market? Everyone has already got used to fiscal policy, and it is too early to make big calls about monetary policy. The MPC remains in a cycle and in 2026 it will consider the target rate. There will be no better time – the forecast of a decrease in the reference rate to 3.5% at the beginning of next year no longer has any market value. Investors may (and should) wonder what the balance of risks is for such a scenario.

Selected macro releases due this month

• Industrial production (our forecast November: 0.5% yoy) Despite the neutral pattern of working days, we believe that industrial production growth slowed down in November due to the specific layout of the calendar (non-working days) and the continued weakness in external demand.
• Retail sales (our forecast November: 5.6% yoy) In our opinion, the good streak of retail sales will continue. An additional factor boosting sales in November should be relatively large pre-Christmas purchases as part of promotions from the end of the month.
• CPI inflation rate (our forecast November: 2.4% yoy) According to the flash estimate, CPI dropped to 2.4% yoy in November, below the NBP target and clearly lower than market expectations (2.6%). The lower reading was due to widely distributed, small surprises on the side of most price categories. The disinflationary trend was also continued by core inflation, which dropped to 2.7-2.8% yoy in November from 3.0% a month earlier. The last time such low levels of core inflation were observed in 2019.
• Wages in the enterprise sector (our forecast November: 6.1% yoy) The pace of wage growth has slowed down faster than expected in recent months and it should be assumed that it will continue to decline. November is also the month in which some mining companies pay St. Barbara's Day bonuses. The industry has had a weaker year and it is very likely that these bonuses will be lower than last year. However, in our opinion, we will see its negative impact on wage growth mainly in the data for December.
• Unemployment rate (our forecast November: 5.7%) The impact of regulatory changes on the increase in the unemployment rate fades, but negative seasonal effects begin to emerge in November (culminating in January and February). Because of this, we think the unemployment rate will rise from 5.6% to 5.7%.
• Current account balance (our forecast October: EUR -100 mn) Poland's balance of payments is still dominated by deficits, both in the trade balance and the current account. Exports is rebounding sluggishly and imports is still driven by import-intensive private consumption and strong PLN. We assume that we will see a trade deficit close to EUR 1 bn again in October.
  However, the overall current account balance in October will reach a significantly smaller deficit than in previous months, but this will only be due to a large seasonal injection of revenues (around EUR 1 bn) into the primary income balance.
• NBP interest rate (our forecast December: 4.00%) Following Friday's downward surprise on inflation (including core inflation!), the Monetary Policy Council has a strong argument for interest rate reduction. A 25 bps cut is our baseline scenario.