Economic news

• RATING: S&P confirmed Poland’s sovereign rating at A- (long term, foreign currency), but lowered the outlook from stable to negative. The agency cited rising risks that the rapid buildup in government debt would limit the government’s leeway to react to negative shocks and weigh on economic growth. 
• INTEREST RATES: The Monetary Policy Council kept interest rates on an unchanged level in November, in line with expectations. The NBP governor reiterated that future decisions will depend on upcoming data, but the Council is unlikely to do anything in December. Mr Glapiński, however, sounded dovish as he emphasized disinflationary factors in his opening statement. We decided to push our rate hike forecasts back, towards 2027. Despite the governor’s newfound dovishness, we believe that this scenario is still in play. Recent statements from other MPC members (Kotecki, Wnorowski, Zarzecki) suggest that the Council is more hawkish than the governor’s statements imply. A more detailed comment on the November meeting can be found below.
• NBP PROJECTIONS: The NBP published its latest „Inflation Report” with fresh economic projections. In particular, the inflation forecaset was raised considerably, from 2.8 to 4.2% on average in 2027 and from 2.4 to 2.9% in 2028. GDP projections were little changed, slightly up for 2027 (from 2.75 to 2.85%) and slightly down for 2028 (from 3.0 to 2.8%). In our view, such projections would easily suport hiking interest rates. The NBP chose otherwise, however. 
• NBP: Prime minister Donald Tusk informed that he countersigned President Nawrocki’s nominations for the NBP board. Thus, Marta Kightley, Ludwik Kotecki, Przemysław Litwiniuk and Marcin Zarzecki will join the board immediately (with the exception of Zarzecki, who will join in January). This dispels the uncertainty regarding the appointments and the potential legal problems associated with mounting vacancies in the board. The appointments imply that the Senate and the President will have to fill three vacancies in the MPC, but the switch is unlikely to impact monetary policy materially. 
• LABOR MARKET: According to the prelimiary estimate from the Ministry of Family, Labor and Social Policy, unemployment rate was unchanged at 5.8% in October, matching forecasts. The number of unemployed registered in labor offices declined slightly. 
• CREDIT: An investment boom is a credit boom as well – latest results of the NBP’s Senior Loan Officer Survey suggests. The survey also suggests that the most important type of corporate loan demanded now is a revolving / current loan. In Q3’26 banks have eased credit standards and saw an increase in corporate loan demand. There were, however, some signs that mortgage loan demand is slowing down. 

“One does not make monetary policy decisions in December, we’ll see about next year”?

When asked by journalists about the possible trajectory of interest rates, the President of the National Bank of Poland noted that the Council is not keen on making monetary policy adjustments in December. Strictly speaking, the same could be said about October or November (see chart below), but we take the Governor’s statement at face value and maintain our forecast that 2026 will end with the reference rate at 3.75%. How, then, does the Monetary Policy Council view the course of monetary policy in the coming year?

Changes in NBP rates, by month (since 2008)

Source: NBP, Pekao Research

Governor Glapiński began the conference by listing the factors anchoring CPI growth, such as:

• Limited ability of firms to pass on rising costs to consumers: The NBP President pointed to relatively weak demand (evident, for example, in the closed output gap – we wrote about this here), which acts as a barrier to the “spillover” of the supply shock into the rest of the CPI basket.
• Subdued labor market and slowing wage growth:wWith a 6% increase in nominal wages in 2026 and average annual inflation above 3%, real purchasing power for households is expected to rise by just under 3%. This is too little for companies to comfortably raise the prices of their products.
• •Passing the peak of the business cycle: A. Glapiński estimated that economic growth in 2027 – without the one-time boost in the form of investments from the National Reconstruction Plan (KPO) and the SAFE program – will fall below this year’s GDP growth rate. Slower economic growth, in turn, will act as a natural factor limiting inflationary pressure.

This dovish outlook served as a sort of counterpoint to the hawkish projection; as a result, the Monetary Policy Council (RPP) left the door open to all possible courses of action: both resuming rate hikes starting in 1Q27 and stabilizing interest rates at their current level. The Chairman himself emphasized that the CPI inflation forecast for next year is subject to extremely high uncertainty, due to both fundamental factors (developments in the Middle East, global freight and marine insurance rates, and food prices) and regulatory factors (energy tariffs, price freezes, and a potential extension of the fuel tax relief program, CPN). In particular, whether CPI growth in 1Q27 will fall within the range of 4.5–5.0% yoy (without the CPN) or 3.5–4.0% yoy (assuming the CPN remains in effect) depends on a possible extension of the CPN into next year.

We agree that the impact of regulatory and discretionary factors on the inflation path in 2027 will be crucial – but at the same time, we emphasize that core inflation in Poland is not bulletproof – persistently elevated energy prices will eventually leave their mark on it. The October drop in core inflation below 3% yoy is an outlier, not the new normal. Our view here is not far from that of President Glapiński, who noted that the war in Iran is dragging on, and the longer the energy shock lasts, the greater the likelihood of so-called second-round effects. To summarize all of the above points, we believe that the Monetary Policy Council (RPP) has not closed the door to further monetary tightening. In our view, higher inflation (including core inflation) and interest rate hikes should be expected in 2027.

Financial markets update

Last week, the domestic market followed the lead of core markets. Specifically, it rose sharply on Wednesday on the back of global optimism and fell to a slightly lesser extent on Thursday. The overall result, however, remains positive. The zloty closed the week below 4.40 / EUR and 3.95 / USD. Bond yields also retreated from their October peaks, falling below 6.2% for the 10Y bond. The market was also buoyed by the de-escalation of the political conflict surrounding the National Bank of Poland (NBP), as evidenced by the prime minister’s approval of an expansion of the bank’s Management Board. Last week’s Monetary Policy Council (RPP) meeting, however, had a limited impact on valuations, especially since everyone could read whatever they wanted into the NBP’s November projections – both arguments for interest rate hikes and reasons for inaction. 

In our view, pessimism—imported from abroad—will return to the domestic market this week. Positive reports on fiscal policy (a smaller deficit) are, for now, too uncertain to change market perceptions, especially given S&P’s recent revision of its rating outlook to negative. We expect the zloty and government bonds to weaken rather than strengthen further. Market attention will focus on Friday’s October inflation reading, which will shed more light on the sources of the decline in core inflation—as implied by the preliminary reading from late last month. We believe this was largely a statistical anomaly that will reverse in the coming months. Therefore, we still expect interest rate hikes in Q1’27.