Economic comment

In August, CPI inflation stood at 2.9% y/y, which is 0.1 pp above the preliminary estimate of 2.8%. According to our calculations, core inflation excluding food and energy probably slowed to 3.2% y/y from 3.3% y/y in July. We expect CPI inflation to rise to around 3.2% y/y in September and remain in the range of 3.2-3.4% y/y until the end of the year, which will be related to increases in heating prices and other household maintenance costs. In our view, August inflation data will not discourage the Monetary Policy Council from further interest rate cuts, and the probable September reading exceeding 3% y/y may act in favour of a decision to postpone the next rate cut until November, when the updated NBP projection will be available.

The tone of today's conference by the President of the National Bank of Poland was in our opinion more hawkish than in previous months, although this was more evident in the first part than at the end. (...) In summary, we are not changing our interest rate scenario: we expect one more 25 bp rate cut in November, when the new NBP projection will confirm the scenario of a moderate decline in inflation in the coming quarters, followed by two more cuts in early 2026, after CPI indeed falls below 3% again. At the same time, we believe that the overall tone of the conference confirms our view that the NBP's terminal rate will be closer to 4% than to 3.5%. The latter level was reached a few months ago by the Czech National Bank (CNB), which President Glapiński pointed to several times today as an example of a situation that the Council would like to avoid, i.e. excessive monetary policy easing, which may require correction. 

The draft budget for 2026 assumes continuation of Poland's accommodative fiscal policy, with a general government (GG) deficit of 6.5% of GDP, compared to 6.9% of GDP this year (...) The draft budget for 2026, along with the estimated realisation in 2025, once again places Poland on a fiscal trajectory that is worse than previously expected. In our opinion, this will not trigger a harsh reaction from the European Commission, which in its assessment focuses primarily on the spending path (which does not exceed agreed targets). The greater uncertainty is the reaction of the rating agencies. In our opinion, the risk of a deterioration in the rating outlook in subsequent updates has increased, although a downgrade still seems very unlikely to us as long as rapid GDP growth continues.