Economic news

• RATES: At its June meeting, the Monetary Policy Council left interest rates unchanged (reference rate at 3.75%). The post-meeting statement was nearly identical to that released in May. However, it is worth noting that the June statement omitted the sentence referring to an increase in core inflation (which, in our view, has stabilised at around 3% yoy). We reiterate our assessment that interest rates will remain unchanged through the end of the year and that inflation will, broadly speaking, remain consistent with the NBP’s target. The latest statement confirms our view that most inflationary factors are currently external (commodity prices, economic activity abroad) or beyond the direct control of monetary policy (fiscal policy, administered prices), which, given weak wage pressures, allows the MPC to remain restrained in shaping the interest rate path. The press conference of NBP Governor A. Glapiński following the MPC’s decision had a dovish tone. The NBP President stated that the current level of interest rates is appropriate to keep inflation in check while not excessively constraining economic activity. He also explicitly noted that he currently sees no need for interest rate hikes. In his view, monetary tightening would be justified only in the event of a significant increase in fuel prices, for instance if the government were to discontinue the CPN programme (i.e. reductions in VAT and excise duties on fuels).
• GDP: According to the second estimate, GDP growth in Q1 was revised up from 3.4% to 3.5% yoy. We also got much more information about its structure: investment performed relatively well at the start of the year (+2.4% yoy), while private consumption remained weaker (3.3% yoy). We discuss these data in greater detail below.
• MINUTES: The course of the May MPC meeting does not indicate that its members would be willing to raise interest rates in response to the energy crisis, according to the MPC minutes. The council members assessed that the scale of the current crisis is much smaller than in the aftermath of the outbreak of the full-scale Russia–Ukraine war and emphasised the high degree of uncertainty regarding the near-term inflation path. They pointed, however, to wage growth as a key indicator to monitor. Were wage growth to accelerate (which is not happening at the moment, rather the opposite), the inflation outlook could deteriorate, potentially justifying a rate hike. We do not expect such a scenario to materialise. In our view, interest rates will remain unchanged at least until the end of the year.
• MINIMUM WAGE: The Ministry of Family, Labour and Social Policy has proposed that the minimum wage in 2027 remain at 50% of the projected average wage (PLN 9,971), implying PLN 4,968 and a minimum hourly rate of PLN 32.60. This would represent an increase of 3.7% yoy (vs. average wage growth rate at around 6%). Employee representatives have proposed raising the minimum wage to PLN 5,200.

Feeble consumption in 1Q26

Revision of the GDP data for the first quarter has dispelled the doubts we had following the flash estimate for that period. Yet, this does not mean that there are no more macroeconomic puzzles to be solved and enquiries to be made. Nevertheless, we now know a little more about the Polish economy in the first quarter. The GDP growth rate itself has been revised slightly upwards, from 3.4% to 3.5% yoy. This does not alter the conclusions regarding GDP growth as such. However, we know marginally more about its structure.

Firstly, private consumption in the first quarter was really weak. Growth in household expenditure in the first quarter of 2026 stood at just 3.3% yoy, well below forecasts and well below what had been expected based on monthly data. In particular, retail sales – which used to be an excellent predictor of consumption in previous quarters – accelerated from 4.5% to 6.3% yoy. Although real wage growth slowed down due to weak nominal wage growth and rising inflation, the decline (0.9 pp.) was smaller than expected. We are therefore faced with quite a puzzle. Either the rise in retail sales was a disguised increase in business and foreign expenditure (e.g. on fuel), in which case we would find it, respectively, in the change in inventories (which did indeed accelerate) or in exports; or consumer spending on services slowed so sharply that it offset the acceleration in sales. The latter scenario cannot be ruled out, but the available data on activity in the services sector do not suggest this.

Household consumption and retail sales (constant prices, % yoy)

Source: Macrobond, Statistics Poland, Pekao Research

Secondly, some of the weakness in private consumption was offset by public consumption, which grew by 6% yoy. This result is better than we had anticipated; generally speaking, we had expected to see the government taking austerity measures: cutting minor government expenditure and opting for smaller pay rises in the public sector. On the contrary, this component of GDP also surprised on the upside last year, so it is not just a one-quarter outlier. One instance is a coincidence, two is an anomaly, but three quarters in a row is a phenomenon requiring explanation. We do not have a good one – high-frequency data from the public finance sector do not provide many clues. We can surmise that the strong public consumption is driven by the hallmark items in the state budget, such as expenditure on healthcare staff salaries and the consumption component of defence spending (expenditure other than on military equipment).

Thirdly, investment slowed to 2.4% yoy in the first quarter. We had expected a decline here, so we were pleasantly surprised, as the impact of frosty winter on investment growth turned out to be noticeably smaller than we had assumed, judging by the construction sector’s results. Data on investment expenditure by non-financial firms, published in the meantime, pointed to improved corporate investment (particularly by private firms, e.g. in manufacturing), which suggested higher overall investment growth. This is precisely what we saw yesterday in the national accounts. 2026 was set to be a year of investment and it will be; we have nothing further to add here.

Investment: non-financial corporations and total economy (constant prices, % yoy)

Source: Macrobond, Statistics Poland, Pekao Research

The revised Q1 data do not, for the time being, warrant any changes to the growth forecasts. To put it simply, the inflation shock will be milder in light of the latest data, whilst the starting point for the consumption trajectory will be lower. Consequently, only minor adjustments to the consumption forecast are warranted (lower in 2026, higher in 2027).

Financial markets update

The day started well for Polish assets, but global factors sent their valuations plummeting: the zloty weakened by over a grosz (which is quite a lot by the standards of recent weeks), yields on Treasury bills rose by around 10 basis points, and the main Warsaw stock indices fell by around 2%. It is worth noting that valuations of domestic assets peaked at the turn of May and June, and have been deteriorating steadily ever since. Last weekend accelerated these trends, but did not trigger them. Today, domestic investors are back at work in full capacity, but the lack of domestic events (macroeconomic data releases or government bond auctions) gives free rein to global sentiments. These favour a sell-off in risky assets, and we would expect the zloty to weaken and government bond yields to rise further in the near term.