Poland to cut rates – GDP structure in the region

We will see the 2Q25 GDP structure in all CEE countries and in the following week we will present our detailed CEE Macro Outlook. Poland and Serbia will present the GDP breakdown on Monday, Hungary on Tuesday and finally, on Friday, Romania and Slovakia will publish the structure. Apart from that, Poland’s central bank will hold a rate setting meeting and we expect a 25 basis point cut. Flash inflation in Croatia and Czechia will also be shown. July’s performance in retail and industry will be released in several CEE countries (Croatia, Hungry, Romania and Slovakia). Romania and Hungary will publish producer prices as well.

FX market developments

Overall, the FX market held up stable against the euro over the last week. Global developments such as US President Donald Trump's dismissal of Federal Reserve Governor Lisa Cook from her post (President Trump has made no secret of his desire to actively take control of the US Federal Reserve) had little impact on the local currency market. Locally, the Hungarian central bank kept the policy rate flat at 6.5%, adhering to the necessity of a careful and patient approach to monetary policy.

This week, Poland’s central bank is expected to ease monetary conditions further. So far, the central bank delivered 75 basis points in cuts this year and, at the upcoming meeting on Wednesday, another 25 basis point cut should be expected. Inflation development (headline CPI at 2.8% y/y in August was below market expectations) supports a monetary easing scenario.

Bond market developments

CEE bond markets remained relatively calm last week, with the notable exception of Poland. The Polish Ministry of Finance presented a draft budget that revised this year’s deficit upward, from 6.3% to 6.9% of GDP. The deficit is expected to remain elevated next year as well, with a target of 6.5% of GDP. The increased financing needs to cover the fiscal gap pushed yields on 10-year POLGBs up by 15bp w/w. However, the ministry noted that part of the deficit will be driven by higher drawdowns of RRF loans, which will also help finance it. Looking ahead to this week’s debt issuance, Czechia and Hungary are scheduled to offer T-bills. Toward the end of the week, Moody’s and Fitch will review the sovereign ratings of Serbia and Poland, respectively. We do not anticipate any changes in either ratings or outlooks.

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