Poland\u2019s National Bank is expected to keep the base rate unchanged at 3.75% at its July meeting, a stance already priced by forwards. Inflation data have cooled: headline CPI slowed to 2.5% y\/y in June and the month-on-month reading turned negative, while seasonally adjusted and smoothed momentum is described as near zero. With lower energy prices and disinflation in food and energy reasserting itself, the earlier narrative of renewed tightening has faded.<\/p>\n
FRA pricing that had implied possible hikes later in 2026 has been reduced, and the debate has shifted towards potential cuts from Q4, with March 2027 also cited as a possible start date for easing. A positive real rate buffer remains, but expectations that it will widen via hikes have been removed, implying a smaller carry premium if markets lean back towards easing. The Czech National Bank is characterised as maintaining a more credible hawkish bias, setting up potential PLN underperformance versus CZK if the MPC delivers neutral, data-dependent guidance.<\/p>\n
We see the National Bank of Poland holding its key rate at 3.75% during its July meeting today. The primary driver for this is slowing inflation, with the latest official data confirming June’s year-on-year headline CPI at just 2.5%. This shift in price momentum effectively removes any pressure on the central bank to consider further tightening.<\/p>\n
The market narrative has completely flipped over the past month. Where forward rate agreements once priced in a small probability of a rate hike later in 2026, they now reflect a stable policy path. We believe the conversation is set to pivot towards potential easing, with some market participants already speculating on rate cuts starting in early 2027.<\/p>\n
This change erodes one of the few remaining pillars of support for the zloty. While Poland maintains a positive real interest rate of around 1.25%, the prospect of this premium widening has disappeared. As rate cut discussions gain traction, the zloty’s carry trade appeal will diminish further.<\/p>\n
In contrast, the Czech National Bank maintains a more hawkish bias, holding its policy rate at 4.00% to combat a more stubborn inflation rate, which recently printed at 3.1%. This growing policy divergence strengthens the outlook for the Czech koruna relative to the zloty. We expect this neutral guidance from Poland today to reinforce the zloty\u2019s likely underperformance.<\/p>\n
For derivative traders, this environment suggests positioning for PLN weakness against the CZK in the coming weeks. We would consider using FX forwards to structure a short PLN and long CZK pair trade. Alternatively, buying EUR\/PLN call options could provide a way to profit from a weakening zloty while managing risk.<\/p>\n\n\n\n