PLN: Inflation Miss Inspires Near-Term NBP Repricing, Weighs On Zloty

EUR/PLN jumped to a fresh session high (4.2540), then pulled back, as flash October CPI missed expectations boosting the perceived probability of an interest-rate cut next week. The rate last deals at 4.2522, up 66 pips on the day, with bulls looking to attack Apr 16/Dec 25 highs of 4.3102/4.3114. Bears look for a move toward May 15/Oct 22 lows of 4.2230/4.2227.

• The market is on the edge ahead of next week's NBP monetary policy decision, with analysts divided as to whether the central bank could trim interest rates once more by the end of this year. The NBP typically sits on its hands in December, so next week's meeting is effectively the last opportunity to adjust monetary policy in 2025.
• Against this backdrop, headline inflation came in at +2.8% Y/Y (versus market and NBP forecasts converging at +3.0%), dropping to the lowest level since June 2024 and closer to the +2.5% target. In addition, sell-side analysts pointed to the apparent drop in core inflation, which may have broken below +3.0% Y/Y.
• Benign inflation figures have fuelled wagers on a November rate cut, even as a narrow majority of MPC members signalled their cautious reluctance to take action next week. On the other hand, the NBP remains data-dependent and is unlikely to ignore favourable inflation data.
• The 3-month WIBOR/1x4 FRA spread has widened to ~21bp as market participants added dovish NBP bets in reaction to the CPI report. POLGB yields have dropped across the curve and last sit 2.1-5.9bp lower on the session, with 2s outperforming amid a shift in near-term views on monetary policy outlook.
• The reaction to the data played out in the context of comments from local officials. PM Tusk said that inflation would likely print at or slightly below +3.0% Y/Y, reaffirming consensus view ahead of what was a marginally more pronounced miss. Separately, Energy Minister Motyka stood by his guidance re: benign household energy price outlook for 2026.
• Turning to local stock markets, the broad-based WIG Index has extended recent losses from the off and last deals 0.5% worse off; blue-chip WIG20 has also shed 0.5%.