The Monetary Sentinel: The Polish central bank faces a close call

A rather quiet week for the central bank leaves just the NBP's interest rate decision, which swings between keeping rates unchanged and cutting rates by a quarter point. While inflationary pressures in Poland have eased, trade-related uncertainty remains elevated.

National Bank of Poland (NBP) – 5.25%

In June, the NBP retained its benchmark interest rate at 5.25%, noting that this level currently supports a return to its inflation objective of 1.5% to 3.5%.

Policymakers have pointed out a number of things that may cause uncertainty, such as demand pressures, the state of the labour market, regulated energy prices, and the government's fiscal position.

In May, headline inflation fell from 4.3% YoY to 4.1%, which was a greater drop than economists had thought it would be.

In his post-meeting press conference, Governor Adam Glapiński stressed that the Monetary Policy Council would not commit to any rate path ahead of time; they will make choices based on new information.

He also said that future energy prices and tax policies were the biggest unknowns. Glapiński also argued that the economy might develop faster in the second quarter and that the recent cuts to gas tariffs would probably lower consumer-price inflation to around 3% in the third quarter.

Upcoming Decision: July 2

Consensus: Unchanged

FX Outlook: The Polish Zloty (PLN) has been continuously appreciating for the last three weeks, sending EUR/PLN to the area of multi-week lows around 4.2350 during last week. Following the breakdown below its key 200-day SMA, the cross is expected to face extra downside pressure in the short-term horizon.