Today’s preliminary inflation reading in Poland opens the door wide for potential interest rate cuts. Meanwhile, economic data from Europe failed to impress investors, and despite falling inflation in Hungary, the central bank there has chosen not to cut rates.
Inflation Drops in Poland
Today, we received April data on price growth. In March, inflation stood at 4.9%, and there were concerns it might break through the 5% threshold. However, analysts had expected a sharp drop in April—and they were right. The result came in at 4.2%. While still above the inflation target, it marks a significant improvement.
It’s worth recalling that in March, the National Bank of Poland (NBP) published its inflation projections, estimating inflation at 5.4% and 5.2% for Q1 and Q2 of this year, respectively. The downward trend is now clearly visible—and significantly stronger than the NBP’s own forecasts. The lower the inflation, the greater the likelihood of an earlier interest rate cut. As a result, discussion about a possible major cut as early as May is back on the table. After months of calm, the upcoming meeting of the Monetary Policy Council (RPP) could prove to be an exciting one. The reaction of the WIBOR rate confirms these expectations.
European Data Disappoints
Today’s macroeconomic calendar is unusually packed due to tomorrow’s public holiday for Labor Day. The day began with weaker retail sales data from Germany, followed by disappointing GDP figures from Hungary. Although consumer inflation in France appears to be rising, it remains at a very low 0.8%. Meanwhile, the producer price index in Paris is falling. Czech GDP grew as expected by 2%. The Swiss KOF economic barometer came in weaker. On a more positive note, Italy reported better-than-expected GDP data. Unfortunately, Germany confirmed that its economy is contracting. As a result of this mixed data, the euro has been losing ground against the dollar since morning.
No Surprises from Hungary
Yesterday, Hungary’s central bank decided to keep interest rates unchanged at 6.5%—exactly half the level reached at the peak of its last tightening cycle. The market had widely expected no change. While the recent drop in inflation from 5.6% to 4.7% gave a glimmer of hope, it wasn’t enough to shift major investor sentiment. As a result, the decision had little impact on the Hungarian forint.
It’s worth noting that by keeping interest rates elevated, the Hungarian central bank has helped cushion recent political turbulence—such as yesterday’s announcement of Hungary withdrawing from the International Criminal Court. While such news might seem unrelated to currency markets, investors prefer predictability, and policy stability can offer reassurance.
Maciej Przygórzewski – Chief Analyst at InternetowyKantor.pl
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Source: https://ceo.com.pl/polska-inflacja-nizsza-niz-prognozy-nbp-wibor-reaguje-rynek-czeka-na-rpp-48163
