ING’s Frantisek Taborsky reports that the National Bank of Poland cut rates by 25bps to 3.75% despite global volatility, with forecasts showing inflation near target by 2028 and solid growth. He sees the move as a dovish signal that further cuts are possible, but expects EUR/PLN to trade lower towards 4.260 if sentiment improves and there is no fresh US-Iran escalation.

Dovish NBP but resilient zloty outlook

"The National Bank of Poland cut rates by 25bps to 3.75% yesterday despite the current global volatility. Although the statement highlighted global uncertainties for inflation, the market was hard-pressed to find any signs of hawkishness."

"The new forecast shows inflation close to the central bank’s target in 2028, while GDP growth remains strong. Still, we expect Governor Adam Glapinski’s press conference today to be rather hawkish given the uncertain energy prices."

"Still, the rate cut is a dovish signal to us that the NBP is not afraid of further rate cuts, although our terminal rate call to 3.25% may still be at risk."

"The market dismantled one rate cut bet during the global sell-off and the priced in terminal rate has moved to around 3.50%. A hawkish press conference might not have much of an impact on the market, while a dovish side is a risk for the market at the moment."

"However, EUR/PLN should still see some downside below 4.260 in an environment of renewed sentiment, unless we see a new escalation of the US-Iran conflict."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)