CEE Macro Weekly: Poland’s MPC keeps adjusting rates

Dowload report

TOP MACRO THEME(S):

• Another rate adjustment in September (p. 3) – MPC reduced its policy rates by 25bp to 4.75% in September, in line with expectations. The move was again characterized as an “adjustment,” highlighting the Council’s cautious stance despite inflation now being assessed as durably at target. The future policy trajectory will depend heavily on energy prices, and we anticipate additional rate reductions in 4q25.

WHAT ELSE CAUGHT OUR EYE:

• POL: GDP growth in 2q25 was confirmed at 3.4% y/y. As anticipated, household consumption remained the principal driver, accelerating to 4.4% y/y from 2.5% y/y in 1q25. Investment, however, proved disappointing, contracting by 1.0% y/y after a 6.3% y/y increase previously. The decline occurred despite higher outlays by enterprises with more than 49 employees and other indications of a revival in investment activity, including robust growth in capital-goods production. This points to weakness in the public sector as a likely factor behind the subdued performance. Net exports continued to weigh on growth, though the drag, at –0.4pp, was smaller than in prior quarters. Inventories declined, yet their contribution to GDP growth remained positive. Overall, the data are consistent with our projection of approximately 3.5% growth for the full year.
• CZE: Headline CPI eased to 2.5% y/y in August from 2.7% y/y in July, in line with expectations. The moderation was driven primarily by a slowdown in food-price growth (4.0% y/y vs 4.9% y/y in July). Energy prices declined by 4.4% y/y compared with a 4.6% y/y drop a month earlier, while services inflation remained elevated at 4.7% y/y, only 0.1pp lower than in July. Estimated core inflation was unchanged at 2.7% y/y. The persistent strength of services inflation underscores the sticky nature of underlying price pressures. Consequently, the CNB is likely to maintain its restrictive monetary policy stance through the end of the year.
• POL: During the visit of Poland’s President K.Nawrocki to the White House, D.Trump affirmed that the United States would maintain a robust military presence in Poland.
• POL: The European Union’s new EUR 150 bn plan to accelerate investment in the bloc’s defense industry is expected to benefit Poland the most, according to Commission President U.von der Leyen.

THE WEEK AHEAD:

• Fitch is scheduled to review Poland’s sovereign rating today. The marked upward revision of deficit and public debt projections may provide grounds for the agency to adjust the outlook from Stable to Negative (current rating: A-). In our assessment, however, the rating itself is likely to remain unchanged.
• This week, we will receive regional current account data, which will likely confirm that Romania remains a negative outlier compared with its peers.
• CPI data for Hungary and Romania is expected to show persistently elevated inflation, which limits the scope for rate cuts this year.