Commerzbank’s Tatha Ghose notes that weaker-than-expected Polish inflation has erased market expectations for 2026 rate hikes and could even revive rate cut discussions by Q4. With disinflation in food and energy and a positive real rate cushion no longer expected to widen, he sees one of the few supports for the Zloty fading, implying underperformance versus the Czech koruna.

Zloty loses support from policy expectations

"Polish CPI inflation surprised clearly to the downside yesterday, with headline inflation slowing to 2.5%y/y from 3.1%y/y in May, weaker than the 2.7% consensus."

"FRA contracts had been pricing in a non-trivial sequence of rate hikes for 2026 only a few weeks ago; these rate hike bets are now being rapidly priced-out of the market."

"The probability that Poland’s National Bank (NBP) will need to hike the rate has slipped to almost zero."

"Indeed, in our view, rate cut bets could return for discussion by Q4, with some commentators already floating March 2027 as a realistic timing for easing to start."

"We therefore see the prospect of PLN underperforming the Czech koruna in coming months, as the rate hike narrative in Poland fades while currency performance has, so far, been on par through the past couple of quarters."

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