Brown Brothers Harriman expects the National Bank of Poland to leave the policy rate unchanged at 3.75% for a third consecutive meeting and indicates the easing phase has ended after 200bps of cuts over the past year. Although headline and core inflation are running above the NBP’s Q2 projections of 2.4% and 2.6%, the backdrop is not yet consistent with a turn to tightening.
May’s headline CPI slipped by -0.1ppt to 3.1% year-on-year versus a 3.6% consensus, pointing to limited passthrough from the energy shock. Growth has also softened: real GDP rose 0.5% quarter-on-quarter in Q1 against a 0.7% consensus, while annual growth slowed to 3.4% compared with the NBP’s 4.0% forecast and 4.1% in Q4. BBH expects USD/PLN to remain rangebound between 3.6000 and 3.7000.
Zloty Outlook: Policy Stability and Low Volatility
With the National Bank of Poland holding its policy rate steady at 3.75%, we see a period of low volatility ahead for the zloty. The central bank’s easing cycle is finished, but weaker-than-expected economic growth and a recent dip in inflation remove any pressure for immediate rate hikes. This stability suggests the currency will remain in a predictable pattern.
Fresh data from Statistics Poland (GUS) supports this view, with May 2026 headline inflation coming in at a benign 2.5% year-on-year. Furthermore, first-quarter GDP growth was confirmed at a modest 2.0%, both figures reinforcing the case for the NBP to remain on the sidelines for now. This removes a key catalyst for any sharp moves in the zloty.
Trading Strategies in a Rangebound Market
Given this outlook, we believe selling volatility is the most attractive strategy in the coming weeks. With 1-month implied volatility for USD/PLN options currently low at around 7.5%, well below the highs seen in previous years, strategies like short strangles or iron condors look appealing. These positions profit from time decay and the currency pair remaining within its expected range.
We expect USD/PLN to continue trading within the narrow 3.6000-3.7000 channel. The current spot rate is hovering just above this band, presenting an opportunity to structure bearish positions that benefit if the pair reverts lower. Selling call spreads with strikes above 3.7000 could be a prudent way to express this view.
Traders must, however, be mindful of the negative carry involved in being short USD/PLN. With the US Federal Reserve’s policy rate at 5.50%, holding a long zloty position costs a trader the interest rate differential, which can erode profits from a range-bound strategy. This makes options strategies that limit holding costs more attractive than outright spot positions.
