Despite the fairly dovish rhetoric of NBP Governor Adam Glapiński, the EUR/PLN exchange rate has remained stable, hovering only slightly above the long-term forecast level of 4.25. The reaction in the Polish equity market has also been limited. Polish assets continue to be driven mainly by external factors, above all developments in the US–Iran relationship.
The war in the Middle East was one of the key topics of today’s press conference. Governor Glapiński spoke with notable optimism about the prospect of easing tensions. He emphasized the stability of the zloty in the face of recent events, which has also stood out in recent market observations. In recent weeks, the Polish currency has shown significantly lower volatility than many of its regional peers, including the Hungarian forint, which is often treated as an important benchmark.
The central bank’s concerns about inflation also appear relatively limited. The current shock is marked by a much smaller increase in energy commodity prices than the one triggered by Russia’s full-scale invasion of Ukraine in 2022. It also seems likely that the rise in prices will prove less persistent, as suggested for example by the recent two-week ceasefire. According to Governor Glapiński, inflation should therefore remain within the central bank’s target range in the coming months.
For financial markets, however, the most important signals concern interest rates. No changes should be expected in the coming months, although much could still change if the situation in the Middle East escalates significantly. What is more, reading between the lines of Governor Glapiński’s remarks, the conclusion is that over a somewhat longer horizon the central bank appears closer to another rate cut than to a rate hike. Recent events, however, have pushed that prospect back to at least the end of the year, and even that would require a more optimistic scenario for the US–Iran conflict.
