Economic news

• RATES: Last Thursday the Monetary Policy Council kept interest rates unchanged. At the press conference, the NBP President struck a notably calm tone. While acknowledging risks related to the conflict in the Middle East, he pointed out that the cost shock is several times smaller than in 2022 and that Poland’s current macroeconomic environment does not favor a de‑anchoring of inflation from fundamentals. We maintain our forecast that the NBP will not raise interest rates in the coming months, but also that rates will not be cut by year-end. We expect two further rate cuts in 2027. Our commentary on the decision and NBP president’s conference can be found below.
• LOANS: According to the Credit Information Bureau (BIK), the number of individuals applying for mortgage loans increased by 72% yoy in March, reaching 63.3k, while the value of credit inquiries rose by 80.5% yoy. This marks a new multi‑year record in terms of the number of inquiries—BIK notes that the last time such a high number of mortgage applications was recorded was in July 2008. It appears that in March applications were submitted by a group of clients who had previously postponed home purchases while awaiting further interest‑rate cuts.
• PRICES: In connection with the ceasefire in the Middle East, Polish government does not intend to withdraw the mechanism aimed at lowering fuel prices at petrol stations, i.e. the CPN package, said Prime Minister Donald Tusk.
• MoF: The Ministry of Finance sold USD‑denominated benchmark bonds with a total value of USD 6 bn. In the Ministry’s view, strong demand confirms a high level of investor confidence in the Polish economy.
• FORECASTS: The World Bank has revised down its GDP growth forecasts for Poland for 2026–2027, from 3.2% and 2.9% previously to 3.1% and 2.6%, respectively. This places the World Bank well below the private‑sector consensus and below forecasts published by other institutions.

Poland's MPC takes a wait-and-see approach

The Monetary Policy Council (MPC) left interest rates unchanged at its April meeting, which came as no surprise. The Council’s communication over recent weeks has been consistent and coherent, clearly indicating a shift to a wait‑and‑see mode - focused on monitoring and analyzing incoming data without a preferred direction for future rate adjustments.

The same tone was evident at the press conference held by the NBP President. According to Adam Glapiński, there are currently no grounds for changing interest rates, nor does he anticipate such changes. Moreover, the NBP President devoted considerable attention to explaining why renewed inflationary pressures should not be a cause for concern. He outlined several arguments supporting the view that the current situation does not constitute a repeat of the 2022 shock:

• A different nature of the shock — the current shock is limited to energy prices and does not affect all energy carriers (coal and electricity prices have remained broadly unchanged).
• A different scale of the shock — during the previous episode, energy prices in Europe increased several‑fold, whereas current increases are roughly an order of magnitude smaller when all energy carriers are taken into account.
• A different macroeconomic environment — labour markets are weaker, aggregate demand is close to or below potential, and corporate margins are relatively low (in contrast to the overheated post‑pandemic economy in 2022).
• A different market environment — the PLN was stable prior to the shock and depreciated only marginally, whereas 2022 saw a substantial depreciation.
• A different monetary policy stance — interest rates are at neutral levels rather than near zero, and inflation is at target rather than significantly above it.

If this set of arguments sounds familiar, that is no coincidence. The NBP views the current shock in virtually the same way that we do. In particular, second‑round effects—while monitored—are not seen as a threat warranting policy action. The NBP explicitly refers to the self‑limiting nature of the oil shock: initially, it leads to higher inflation, lower real disposable income, and weaker consumption; subsequently, inflation declines as GDP falls below potential. This narrative differs from the views presented last month i. a. by the NBP itself and the Bank of England. The NBP is not turning hawkish—its response to the oil shock is conventional and textbook‑like, consisting primarily of non‑reaction. We even get the impression that the central bank is relatively relaxed.

What does this imply for the interest‑rate path in Poland? We believe that policy rates will remain unchanged until year‑end. The remaining room for rate cuts (25–50 bps) was limited to begin with, and as the inflation path has shifted from the lower to the upper half of the target tolerance band, the arguments for continuing the easing cycle in the near term have faded. In our view, a window for resuming rate cuts may emerge next year once the effects of the oil shock dissipate and GDP growth weakens. However, it is far too early for such a discussion within the Council.

Spread between FRA contracts and WIBOR 3M, bps

Source: Refinitiv

Could financial markets nevertheless force the NBP into raising rates? At present, they do not. Market pricing has changed dramatically compared with mid‑last month: markets are now effectively no longer pricing in rate hikes, whereas just two weeks ago they were pricing in as many as three. The ceasefire in the Middle East and the flattening of the yield curve have rendered our previous analysis of market pressure on the NBP obsolete, prompting us to present it in a more hypothetical framework.

In theory, a central bank can ignore market expectations. In practice, the situation is more complex. Market pricing provides valuable feedback about the economic reality the central bank seeks to influence. In extreme cases, market expectations can become self‑fulfilling if accompanied by capital outflows. We therefore examined how markets have historically performed in anticipating future NBP actions—and how the NBP has responded to market pressure. The framework is deliberately simplified: we compare the one‑year‑ahead change in WIBOR 3M implied by FRA 12x15 contracts with the actual change in WIBOR 3M over the subsequent year. What do we find?

• Historically, markets have anticipated all major turning points in Polish monetary policy well in advance.
• However, market pricing has not been a perfect predictor—one year is a long horizon, and certain shocks (most notably COVID‑19) were impossible to foresee.
• Markets tend to underestimate the eventual magnitude of rate changes; ex post, easing and tightening cycles have always turned out larger than initially priced, suggesting that FRA markets primarily capture only the first steps taken by the NBP.
• By contrast, pricing of small rate adjustments in either direction often lacked predictive power altogether. For example, in 2016–17 rates were not cut despite the market pricing 1–1.5 such moves, and in 2014–15 the MPC did not raise rates—instead, it delivered rate cuts.

In terms of magnitude, last month’s market pricing most closely resembled the scenario described in the last point: a relatively small adjustment largely driven by the natural steepening of the yield curve. This type of pressure was easily manageable for the NBP—and indeed, it has just proven to be so.

Rate changes implied by the FRA contracts vs subsequent realised price changes

Source: Refinitiv, Pekao Research

Financial market update

The first round of US–Iran negotiations ended without a breakthrough, but not without consequences. Instead of lifting Iran’s blockade of the Strait of Hormuz, the United States will introduce its own. While this may sound counterintuitive at first glance, it effectively involves closing the strait to Iranian vessels and shipments of crude oil from Iran (as well as goods imported by the country). This represents a fairly straightforward channel of pressure on Iran—its earlier absence appeared to be a strategic inconsistency—but it carries repercussions for the global economy, as it removes part of oil supply from the market.

The market reacted immediately: oil prices jumped by around 7–8% at the open and once again moved above USD 100 per barrel. Negotiations will continue and are likely to generate considerable headline noise, yet a quick look at market pricing suggests that investors nevertheless assume the worst is already behind us. As a result, markets still have room to refocus on standard macroeconomic drivers, just as they did at the end of last week when US inflation data took centre stage.

That said, the coming days will be relatively light in terms of top‑tier data releases—the closest in importance will be US sentiment indicators and the weekly labour‑market report. It is also worth bearing in mind that markets may be misjudging the balance of risks surrounding the current situation in the Gulf. While political considerations likely imply a high threshold for a resumption of military hostilities, the number of potential escalation scenarios remains significant. A return to normality has once again been delayed.