Poland’s January CPI came in above forecasts, mainly because of technical effects and volatile items. Even so, headline inflation stayed below the National Bank of Poland (NBP) target. The flash estimate showed CPI at 2.2% year on year in January, compared with 1.9% expected, and down from 2.4% in December.
This was the second month in a row with inflation below the NBP’s 2.5% target (with a tolerance band of plus or minus 1 percentage point). Disinflation was driven mostly by cheaper petrol. Fuel prices fell 7.1% year on year, after a 3.1% drop in December.
Despite the upside surprise, the broader trend still pointed to lower inflation. Based on this, a 25bp policy rate cut in March was still expected.
The NBP’s March macroeconomic projection was expected to show a better inflation path than the December projection. That could mean a terminal policy rate below 3.50%, a level policymakers have referenced in recent weeks.
With January inflation at 2.2%—below the central bank’s target for the second straight month—we see a clear case for monetary easing. The data supports our view that disinflation is firmly in place, even if there are small monthly surprises. We expect the NBP to cut its key rate by 25 basis points at its meeting next month.
Because of this, we prefer receive-fixed positions in Polish interest rate swaps, on the view that floating rates will fall. The 2-year Polish government bond yield has already dropped to 3.95% this month, suggesting the market is pricing in easing before the NBP’s formal decision. We take this as confirmation that markets agree on the direction of rates.
We also expect the Polish zloty to weaken as its yield advantage fades. EUR/PLN has already risen from 4.31 to 4.34 in early February 2026, and we think it can move higher. We are buying EUR/PLN call options expiring in April to benefit from this expected depreciation.
Easier financial conditions should also support Polish equities. In the past, the WIG20 index rose by more than 8% in the three months after the NBP’s last easing cycle began in late 2024. With GDP growth slowing to 2.9% in Q4 2025, we are buying WIG20 index futures in expectation that a rate cut will support the economy and lift share prices.
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