Will Poland cut rates further?

There are two central bank meetings scheduled. In Czechia, stability of rates is the most likely scenario, while in Poland, the door for another rate cut remains open. A day prior to the central bank meeting in Czechia, October’s inflation will be published, but we expect no influence from that release on the central bankers. The week will begin with the release of manufacturing PMIs for several countries in the region, setting the tone for the fourth quarter already. Other than that, October’s retail sales growth will be released in Romania, Czechia, Hungary and Slovakia, while industrial output growth will be published in Hungary and Czechia. We will also get to see trade data in September for Slovenia, Czechia, Croatia and Slovakia, as well as October’s producer prices in Romania and Serbia. On Friday, after the market closes, Moody’s is scheduled to review Croatia’s rating, while S&P will review Poland’s rating (Moody’s and Fitch Ratings have already granted Poland a negative outlook, due to fiscal risks).

FX market developments

The decisions of major central banks have had little impact on the local FX market development. While the Fed cut interest rates (and left the further path open), the ECB left interest rates untouched. The Czech koruna remained quite stable and the Hungarian forint strengthened against the euro last week. The Polish zloty was stable throughout the week and weakened on Friday after the release of October’s inflation figure. It surprised to the downside, increasing the chances for Poland’s central bank to cut interest rates this week. There are two central bank meetings this week. As mentioned, in Poland, we may see another rate cut, especially as October’s inflation was lower than expected (2.8% y/y in October). On top of that, new inflation and growth projections will be published that may influence the decision process of the National Bank of Poland. In Czechia, we do not expect any change at the upcoming meeting.

Bond market developments

Long-term yields have moved lower over the last week across the region, except for Czechia, where 10Y yields increased slightly. The biggest decline of long-term yields took place in Romania, with that development supported by the news that the budget gap at the end of September was at 5.4% of GDP. Last week, Slovakia issued EUR 2bn in a new 12-year government bond via a syndicated deal on Tuesday. Order books attracted more than EUR 3.8bn in demand. The spread on the bond was set at 99 basis points above mid-swaps. Slovakia has raised EUR 11.7bn in bonds this year, nearly reaching its annual target of EUR 12bn. In Czechia, ANO party leader Babis pledged to keep the budget deficit in 2026 as it has already been proposed. This week, activity on the bond market will be limited in the region.

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