Economic comment

The Monetary Policy Council cut main interest rates by 25bp, the main reference rate to 4.25%, in line with market consensus. The updated NBP projection shows the mid-point of 50% confidence range for inflation forecast at 3.65% in 2025 (0.3pp lower than in July), 2.95% in 2026 (0.15pp lower) and 2.6% in 2027 (0.25pp higher than in July). GDP forecast was lowered slightly in 2025 (-0.15pp, to 3.45%), and lifted significantly in 2026 (+0.55pp, to 3.65%) and only minimally 2027 (+0.1pp to 2.6%). The post-meeting statement did not change significantly compared to the October’s version and does not include any new forward guidance. The list of risk factors for inflation remained virtually unchanged.  (...)

Today's data proved slightly worse than expected. Retail sales rose by 6.4% y/y in September, slightly slower than our forecast (7.3% y/y). Seasonally adjusted figures showed a decline of 0.6% m/m. The business confidence survey for October showed an improvement in sentiment among a large portion of companies, while the consumer survey was somewhat disappointing after the strong optimism seen in September. The NBP survey of companies also indicated a slight improvement in business conditions in the past quarter. The final element of the morning's data was the agricultural product purchase price index, which recorded a decline in growth to 9.8% y/y in September from 11.8% y/y in August. Despite the weaker-than-expected sales reading, we still believe the outlook for private consumption remains good (...).

In September, Polish construction output rose 0.2% y/y against market expectations of a decline by 2.3% y/y and our -1.5% y/y forecast, which proves the one-off nature of the August unexpected collapse (-6.9% y/y). Housing market data is also significantly better than in August. The number of apartments completed reached 19.1k, the best result this year and +22.1% y/y. Poland faces a major increase of investment effort related to the EU funds inflow and the realisation of Recovery and Resilience Plan. This should translate to higher activity in construction, but not necessarily in the nearest future. 
Data from the public finance sector indicated an increase in the deficit to 7.0% of GDP in 2Q25 from 6.8% of GDP in 1Q25. In our opinion, this means a growing risk that the deficit will exceed 7% of GDP at the end of the year (compared to 6.9% of GDP in the budget act).