Brown Brothers Harriman’s (BBH) Elias Haddad expects the National Bank of Poland (NBP) to keep its policy rate at 3.75% and sees its easing cycle as effectively over. Despite inflation running above projections, softer Gross Domestic Product (GDP) growth and a recent downside surprise in Consumer Price Index (CPI) argue against imminent hikes. Haddad anticipates USD/PLN will continue to trade within a narrow 3.6000–3.7000 band.

NBP on hold, rangebound Zloty

"National Bank of Poland (NBP) is widely expected to keep the policy rate at 3.75% for a third straight meeting. NBP signaled that its easing cycle, which saw it deliver 200bps of cuts in the past year, is over."

"However, it’s too soon to bet on rate hikes even though headline and core inflation in Poland are tracking above the NBP’s Q2 projection of 2.4% and 2.6%, respectively."

"First, headline CPI unexpectedly dropped -0.1ppt to 3.1% y/y in May (consensus: 3.6%) suggesting limited passthrough from the energy shock. Second, real GDP grew less than expected in Q1 (0.5% q/q, consensus: 0.7%) and slowed at an annual pace of 3.4% (NBP forecast: 4.0%) vs. 4.1% in Q4."

"We expect USD/PLN to continue trading within a narrow 3.6000-3.7000 range."

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