Poland’s January CPI came in higher than forecasts due to technical factors and volatile items, but headline inflation stayed below the National Bank of Poland (NBP) target. The flash estimate put CPI at 2.2% year on year in January, versus 1.9% expected, down from 2.4% in December.
This marked the second month in a row with inflation below the NBP target of 2.5%, with a tolerance band of plus or minus 1 percentage point. Disinflation was mainly linked to lower petrol costs, with fuel down 7.1% year on year after a 3.1% fall in December.
Inflation Trend And Policy Outlook
Despite the upside surprise, the broader trend remained towards lower inflation. On this basis, a 25bp policy rate cut in March was still expected.
The March NBP macroeconomic projection was expected to show a better inflation path than the December projection. This could imply a terminal policy rate below 3.50%, a level referenced by policymakers in recent weeks.
With Polish inflation for January coming in at 2.2%, below the central bank’s target for the second straight month, we see a clear path to monetary easing. The data reinforces our view that disinflation is firmly in place despite minor monthly surprises. We are positioning for the National Bank of Poland (NBP) to cut its key interest rate by 25 basis points at its meeting next month.
This expectation leads us to favor receive-fixed positions in Polish interest rate swaps, betting on floating rates to fall. The 2-year Polish government bond yield has already declined to 3.95% this month, pricing in monetary easing ahead of the NBP’s formal announcement. We see this as confirmation that the market shares our view on the direction of rates.
Market Strategy And Trade Positioning
Consequently, we anticipate the Polish Zloty will weaken as its yield advantage diminishes. The EUR/PLN exchange rate has already climbed from 4.31 to 4.34 in early February 2026, and we believe there is further upside. We are buying call options on EUR/PLN with April expiry dates to capitalize on this expected depreciation.
Looser financial conditions should also provide a boost to Polish equities. Looking back, the WIG20 index rallied over 8% in the three months following the NBP’s last easing cycle which began in late 2024. Given that GDP growth slowed to 2.9% in the last quarter of 2025, we are buying WIG20 index futures in anticipation that this rate cut will stimulate the economy and lift share prices.
