CEE Macro Weekly: Prosperous New Year!

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TOP MACRO THEME(S):

• What will 2026 bring for the CEE region? (p.3) –Investment is set to become an important engine of growth, helping to sustain – at a minimum – the pace achieved in 2025. With inflation across much of the region likely to hover near targets, further interest rate cuts are possible. The greatest challenge will be fiscal policy, but fiscal consolidation is unlikely to be widespread.

WHAT ELSE CAUGHT OUR EYE:

• POL: According to preliminary data, CPI inflation in December fell to 2.4% y/y from 2.5% y/y in November (PKOe: 2.3%, cons.: 2.5%). Inflation surprised to the downside for the fourth consecutive month, also coming in below the NBP’s assumptions. The decline in inflation was driven by stable m/m food prices and a fall in fuel prices; we estimate that core inflation amounted to 2.7-2.8% y/y versus 2.7% y/y in November. Food prices may also act disinflationary in the coming months, as purchase prices of basic agricultural products in November fell by 0.7% y/y. So far, inflation readings lower than forecasts have resulted in NBP rate cuts. December data therefore increase the probability of a rate cut at next week’s MPC meeting, contrary to the recent cautious statements by the MPC members.
• POL: Retail sales in November increased by 3.1% y/y. The slowdown relative to October (5.4% y/y) was largely due to calendar effects. After seasonal adjustment (+5.5% y/y, +1.1% m/m), demand remains solid, and the data show a clear increase in spending on durable goods. In 2026, sales will be supported by real wage growth and favourable consumer sentiment. The observed revival in mortgage loans is an optimistic signal for sales of furniture, consumer electronics and household appliances.
• POL: M3 money supply in November rose by 10.6% r/r, the same as in October. Corporate loans increased by 10% y/y, the first double digit growth since November 2022. Household lending is accelerating steadily – consumer loans rose by 8.1% y/y, the strongest since 2020, and PLN-denominated housing loans by 7.7% y/y, the strongest in 2025.
• POL: The manufacturing PMI in December fell to 48.5 from 49.1, slightly more than forecast, but companies’ expectations for the year ahead improved markedly – the future output index rose sharply, returning to its long-term average.
• POL: President K.Nawrocki appointed M.Zarzecki to a six-year term on the Monetary Policy Council (he will replace C. Kochalski). To date, the new MPC member has not publicly commented on monetary policy issues.
• POL: The registered unemployment rate remained at 5.6% in November, below expectations (5.7%). The data suggest that the impact of legal changes that had been pushing unemployment higher is fading, and that labour market conditions may be gradually improving.

THE WEEK AHEAD:

• In Poland, the key event will be the MPC meeting (Wed.) and the presser of NBP governor (Thu.) - the consensus expects rates to remain unchanged, but December inflation coming in below forecasts has increased the likelihood of another rate cut. In the region, inflation will dominate data releases, with December CPI figures from Romania (Wed.), final readings from Czechia (Tue.) and Poland (Thu.), and Poland’s core inflation (Fri.).