MNI NBP Preview - Mar 2026: On Horns Of Dilemma

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Executive Summary:

• Benign data signals from 1Q26 had uderpinned the earlier consensus call for a 25bp cut.
• However, the onset and escalation of the Iran conflict raises uncertainty around the outcome.
• The new projection should chart on-target inflation into 2027 as the outlook remains benign.

The escalating exchange of fire in the Middle East threw the Monetary Policy Council (MPC) a curveball, putting the widely anticipated 25bp interest-rate cut into question. A streak of net-dovish domestic data, communications from a majority of rate-setting panel members, and the potential for the new triannual macroeconomic projection to signal a sustainable medium-term return to the +2.5% Y/Y inflation target underpinned ironclad consensus around the call for a resumption of monetary easing. However, concerns about potential second-round effects of a spike in energy prices could prompt the National Bank of Poland (NBP) to extend pause in monetary easing until the end of 1Q26. This would allow the NBP to arrest zloty depreciation and would be consistent with its conservative approach during this ‘fine-tuning’ stage of the policy cycle. We think that the Iran conflict has rendered this meeting a very close call. There is a strong case for the NBP to reduce the reference rate by 25bp to 3.75% on the back of benign domestic fundamentals while deploying cautious rhetoric and signalling potential for a longer pause. However, an extended pause is almost equally as likely, and the outcome could be forged in the course of the meeting.