Commerzbank’s Tatha Ghose notes that updated Polish CPI data confirm disinflation, with core inflation at 2.5% year-on-year, in line with the central bank of Poland, Narodowy Bank Polski (NBP) target. While this would normally support further easing, geopolitical tensions, Oil price moves and domestic political uncertainty are seen keeping policy tentative over the coming quarter, a backdrop viewed as negative for the Polish Zloty (PLN).

Dovish data versus geopolitical headwinds

"The clear disinflationary trend backs up NBP’s renewed dovish policy stance and the March rate cut."

"Ordinarily, such data would cement expectations for further monetary easing."

"However, policymakers have signalled a "wait-and-see" approach – both because of recent escalation of geopolitical conflict, which is inflicting volatility on the currency, as well as local political escalation which has seen (opposition-aligned) president Nawrocki join forces with (opposition-aligned) NBP chief Adam Glapinski to create uncertainty regarding defence spending and other policies."

"Among these two factors, world developments will dominate – in particular, the oil price surge – to keep Polish monetary policy stance rather tentative over the coming quarter."

"This environment is not a positive for the zloty even though it might prevent rate cuts."

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