January data from Poland strengthened expectations of a 25 bp interest rate cut at the March Monetary Policy Council meeting. The data included weaker readings for activity and prices, alongside slower wage growth.
Manufacturing output in January came in below forecasts and declined. Construction output fell 12.8% year on year, with output down in 21 of 34 tracked sectors.
Poland Data Reinforces Rate Cut Expectations
Producer price inflation fell further to -2.6% year on year in January. This was the largest decline since December 2024 and was below the market consensus.
The data align with lower inflation pressures and support the case for a March rate cut. The Polish zloty could lag peer currencies in the coming months, unless Hungarian policy turns more dovish.
Recent data strongly suggests the National Bank of Poland will cut interest rates by 25 basis points at its March meeting. The latest statistics for January 2026 showed inflation falling sharply to 2.9%, much faster than anticipated and nearing the bank’s 2.5% target. This reinforces the disinflationary trend we’ve seen developing since late last year.
The economic slowdown is also becoming more apparent, with Poland’s Q4 2025 GDP growth being revised lower to just 0.8%. Furthermore, January’s industrial production report showed an unexpected contraction, signaling a weak start to 2026. This mirrors the broader regional slowdown that began after the post-pandemic recovery faded.
Market Positioning Ahead Of March Meeting
We must remember how the central bank acted back in 2025, surprising us with a large 75 basis point cut in September. That aggressive move showed a clear willingness to support the economy in the face of slowing growth and prices. Another cut now would be consistent with that established policy direction.
For derivative traders, this outlook suggests positioning for a weaker Zloty, particularly against currencies like the Euro or US Dollar. Buying EUR/PLN call options could be an effective way to profit from a potential decline in the Zloty’s value. This strategy offers a defined risk while capturing the upside if the Polish central bank acts as expected.
It is also crucial to watch the Hungarian central bank, as its actions provide a key regional comparison. If the National Bank of Poland delivers the expected cut while Hungary holds rates or signals a pause, the Zloty is likely to underperform the Forint. This relative value trade could offer opportunities in the weeks leading up to the policy meeting.
