Poland to cut rates, GDP details across region
|This week, global developments will be key focus following the US and Israel coordinated, massive missile attacks on Iran. Locally, Poland’s central bank is expected to lower the key policy rate. Other than that, in Poland and in other CEE countries, details on 4Q25 GDP will be published. We will get to know how private consumption, investment and external balances developed not only in 4Q25, but in the whole of 2025. January’s retail sales will be published in Hungary, Slovakia and Serbia. Industrial output growth will also be released in Hungary and Croatia. Weather conditions at the beginning of the year could have a negative influence on the industry performance. Czechia will also show the February flash inflation estimate on Wednesday. Finally, Hungary is scheduled to publish trade data and its unemployment rate, Romania will release producer price growth for January and Slovenia will publish its trade balance. On Friday, after market close, Fitch Ratings is scheduled to review Croatia’s rating. We do not expect any change at this point. Moody’s will also review Romania’s rating and outlook.  
FX market developments
The Hungarian forint strengthened quite visibly over the last week, with the EURHUF falling toward 375 in the aftermath of the central bank decision. The Hungarian central bank decided to lower the keep policy rate to 6.25%, responding to the inflation decline over the last couple of months. The EURCZK and EURPLN remained stable in a w/w comparison. This week, Poland’s central bank is expected to deliver an interest rate cut and the key policy rate in Poland should fall below 4% in March. New inflation and growth projections will also be published. The new projections may set the tone for the further monetary policy direction and central bank decisions in 2026. Poland is getting closer to the terminal rate, however. Central banker Dabrowski stated that he sees the target level for the main rate at 3.5%, noting that further cuts would be very difficult unless inflation anchors in the lower part of the target band. Following the US and Israel coordinated, massive missile attacks on Iran we expect markets to be impacted by global development, increase in risk aversion and likely safe haven flows.
Bond market developments
Over the last week, long-term yields declined across the region. The most pronounced drop was recorded in Croatia, Hungary and Slovakia. In Hungary, the prospects for another interest rate cut in March support a lower level of yields, overall. This lower level of yields translates into lower borrowing costs in the region. For example, Romania sold RON 500mn of government papers maturing in 2034 on Thursday. The average accepted yield fell to 6.21%, from 6.67% for the same issue held last month. Last week, a couple of CEE countries tapped the international bond market. Romania tapped international debt markets for the first time this year. Romania priced EUR 3bn of 7Y euro notes and USD 2bn of 10Y dollar bonds on Wednesday. Hungary on Tuesday tapped a 2035 dollar bond first sold last year, raising an additional USD 1.2bn in a private placement. As for other fiscal news, Romania recorded a general government budget surplus of RON 845mn (0.04% of GDP) in January. Poland’s Ministry of Finance announced that the state budget deficit in 2025 amounted to PLN 275.6bn, which was below the planned PLN 288.8bn. Approximately 38% of the gross borrowing needs for 2026 have been financed.
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