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Macroeconomic scenario

Economic growth

The third quarter in the Polish economy concluded on a solid note. Robust readings from the industrial and construction sectors offset a slight disappointment in retail sales, although the analysts have hoped for more. Nonetheless, the acceleration of economic growth in the third quarter is evident. We estimate GDP growth at approximately 3.9% yoy, compared with 3.4% in the previous quarter. Our full-year growth forecast of 3.6% remains unchanged, while 2026 is expected to mark a return to growth with “a four in front.”

Inflation

With little change, Poland’s inflation outlook remains stable. In the coming months, CPI inflation is expected to stay within a narrow range of 2.5–3.0% yoy. Core inflation, while on a downward trend, remains higher—mainly due to elevated yet gradually easing cost pressures. At the same time, stable commodity and industrial goods prices are not generating inflationary pressure on goods prices. The freeze on household electricity prices for the fourth quarter of 2025, along with the expected similar tariff levels for 2026, mitigates the risk of inflation being driven up by energy prices. On average, CPI inflation in 2025 is projected at 3.7%, broadly in line with the 2024 level.

Labour market

If one were to exclude the unemployment rate from the set of labour market indicators, it could be confidently stated that calm prevails in the domestic labour market. Wage growth has slowed to around 7.5%, and there is little to suggest that it will stabilize at this level—further declines appear inevitable. Employment indicators remain persistently subdued: the nearly constant yoy decreases of around 0.8% observed in recent months seem to represent a comfortable pace for domestic employment, with no signs of imminent change. The unemployment rate continues to be affected by regulatory adjustments—a factor that is gradually fading and should fully dissipate by the end of the year.

Monetary policy

The unexpected rate cut in October reinforced our view that the MPC is more dovish behind the scenes than public statements by its members would suggest. Over the past month, those statements have been mixed in tone, though they implied a readiness to consider a November rate reduction in the event of data surprises. Such a surprise came with the October inflation reading, which—together with the disinflationary tone of the latest projection—will, in our view, result in one final 25 basis point rate cut this year. Additional reductions totalling 75 basis points are expected in the early months of 2026.

Financial markets

The Inflation Ghost Missed Halloween

Despite the prolonged U.S. federal government shutdown, we still have a relatively clear picture of the American economy. The most important takeaway is that inflation is not accelerating as feared. The delayed CPI reading for September came in below expectations (0.3% yoy versus the forecasted 0.4% yoy), and sentiment indicators suggest that cost pressures within firms remain subdued. We also know that the U.S. labor market is showing signs of weakness. Altogether, these developments create room for further rate cuts by the Federal Reserve. Although markets remain cautious following Chair J. Powell’s latest hawkish press conference, we expect U.S. Treasury yields to move lower in the coming weeks.
In the euro area, inflation is even less alarming than in the U.S., having fluctuated between 1.9% and 2.5% yoy for the past year and a half. It is therefore unsurprising that the ECB’s new mantra is that it is in a “good place.” Nevertheless, investors may be asking where inflation is headed in the months ahead. We expect the trajectory to be downward. Disinflationary forces include base effects, a stronger euro, lower energy and fuel prices, and the impact of trade tensions. Wage negotiations across the euro area also point to a slowdown in pay growth in 2026. Consequently, the ECB may soon face the prospect of inflation falling below target, prompting markets to speculate about the possibility of additional rate cuts. Fiscal risks within the euro area have temporarily receded into the background. Taken together, these factors are contributing to a decline in sovereign bond yields across Europe as well. However, the scope for monetary easing in the euro area remains significantly smaller than in the U.S., which is why we maintain our scenario of further EUR/USD appreciation.

POLGBS Yields Lower, EUR/PLN Higher

Inflation in Poland has also surprised on the downside recently—particularly core inflation, which, based on our estimates, may decelerate below 3% in October. In our view, this is not a temporary phenomenon. The same arguments that support continued disinflation in the euro area—most notably the slowdown in wage growth—apply equally to Poland. We expect this to be reflected in the National Bank of Poland’s November inflation projection. The macroeconomic environment remains conducive to further policy easing, and we anticipate that the Monetary Policy Council (MPC) will take advantage of this space. We foresee a rate cut at today’s meeting and further reductions in early 2026, bringing the policy rate to a target level of 3.5%. This is not a new scenario for us, but recent macroeconomic data have increased its likelihood.
While markets have already priced in today’s rate cut to a large extent, Polish government bond yields remain only slightly below their levels from three months ago—particularly on the 10-year tenor. Fiscal concerns continue to weigh on sentiment toward Polish debt, yet we still see substantial room for yield compression in November. The zloty, after an unsuccessful attempt to break out of its multi-month consolidation range, is likely to continue trading within the current band of 4.24–4.28 against the euro in November, with a strong probability of testing the upper bound.

Selected macro releases due this month

• Industrial production (our forecast October: 0.0% yoy) In October, industrial output was affected by the accumulation of two base effects—one from the previous year and the other from the preceding month. Combined with an unfavourable working-day difference (+1 yoyin September versus 0 in October), these factors are expected to lead to a sharp deceleration in production, bringing the reading close to stagnation.
• Retail sales (our forecast October: 3.6% yoy) The fading of last month’s exceptionally low base effect will likewise result in a marked slowdown in retail sales. The number of trading days will offer no support to the indicator, nor will the high base in the “miscellaneous” category. Nonetheless, the strength of the domestic consumer remains intact, and the reading is therefore expected to stay firmly in positive territory.
• CPI inflation rate (our forecast October: 2.8% yoy) October brought another downside surprise in CPI inflation, which stood at 2.8% yoy. Nearly the entire extent of the surprise resulted from a pronounced decline in core inflation—from 3.2% yoy in September to around 2.9% in October. This represents an important signal of weakening domestic price pressures and provides a strong argument in favour of another rate cut by the Monetary Policy Council.
• Wages in the enterprise sector (our forecast October: 7.1% yoy) In our view, October marked yet another month of decelerating wage growth. The weakening wage pressure is pushing the growth rate increasingly close to the important 7% threshold. We believe October will not be the month when this level is breached, with wage growth expected at 7.1% yoy. However, the likelihood of seeing a figure “with a six in front” will be considerable in November.
• Unemployment rate (our forecast October: 5.6%) The unemployment rate continues to be persistently influenced by the regulatory changes introduced in June. While their impact is now clearly smaller than during the summer months, it remains noticeable—we estimate that in October, these effects will account for an additional increase of roughly 10k unemployed. Consequently, we expect the unemployment rate to remain at its September level of 5.6%, although a slightly higher reading (5.7%) cannot be ruled out.
• Current account balance (our forecast September: EUR -1500 mn) Poland’s balance of payments continues to be dominated by deficits, both on the trade balance and the overall current account. Nonetheless, it appears that the economy is emerging from a cyclical trough, and net exports are expected to gradually improve. This process, however, is likely to be slow. Exports are recovering sluggishly, while imports continue to be driven by import-intensive private consumption and a strong PLN. We assume that in September the current account will again record a deficit of approximately EUR 1.5 billion.
• MPC decision (our forecast November: 4.25%) Following Friday’s downside surprise in inflation (mainly in core inflation), the Monetary Policy Council has a strong argument for a rate cut. Moreover, we believe that the November NBP inflation projection will confirm that significant room for interest rate reductions remains, and that Council members will choose to act on it. A 25 basis point cut represents our baseline scenario.